How to Qualify For Low-Interest Mortgage Rates

How to Qualify For Low-Interest Mortgage Rates -


How to Qualify For Low-Interest Mortgage Rates

Buying a home is not a simple process especially with regard to mortgages. Home buyers are always looking for ways to get low-interest mortgage rates. Factors such as your mortgage type, credit score and down payment affect your mortgage rate. Most real estate agents will direct you to many lenders regardless of their rates. How do you get the best rate from these lenders? This article will discuss how you can qualify for low-interest mortgage rates.

1. Improve Your Credit Score

Your credit score and history shows how disciplined you are as a borrower with your debts. It is a measure of your creditworthiness. It shows lenders your ability to pay back a loan. So a higher credit score is good for you because lenders will see you as s responsible person. It also increases your chances of getting low-interest rates on your mortgage.

If you currently have a low credit score, what can you do to increase it? First, ensure that you make your credit payments on time. If you often forget to make payments, take measures that will help you remember. You can ask your bank to send you reminders or enroll in automatic payments through your credit card and lenders to have payments debited from your account.

Second, reduce the amount you owe. If you can’t control the urge to overspend, use a debit card instead of a credit card. This will keep your debts low. The balance on your credit card should be as low as possible and remove collection accounts from your credit.

If you have a friend or relative with a credit card that has a positive payment history, you can ask the person to add you as an authorized user of the account while you try to get your mortgage. This will improve your score. The person can remove you after you’ve obtained the mortgage.

These are some ways to improve your credit score. Know that your credit score won’t improve overnight. But consistently working towards improving it with these tips will eventually yield positive results.

2. Increase Your Down Payment

Saving can be difficult but if you save enough towards your down payment you can get the best interest rate. Making a down payment of about 15 to 20% is one of the surest ways to get the lowest mortgage rate. Sometimes, if you make a huge down payment, you won’t have to pay mortgage insurance.

Larger down payments show lenders that you won’t lose a big risk to them. The amount that is left for you to pay will be small, so they will be more comfortable to give you a low-interest rate.

3. Decide How Long You Will Live In The Home

This is necessary because it will determine the type of mortgage you go for. If you are not going to stay in the home for long, consider getting a fixed rate mortgage. You will make bigger monthly payments but with a much lower interest rate.

There is also the adjustable rate mortgage which has initial low-interest rates. The rates increase with time but most homeowners who choose this type of mortgage sell off their homes before it gets too high.

4. Do Some Research

Don’t just go with the lender a real estate agent recommends just because you know the agent. Do your personal research to compare the rates. You may not be able to find your local lenders on the internet so you should ask around to find the best lender in your area. If you have family and friends who have recently purchased a home, contact them and conduct a quick survey. Ask them how they were treated and if they were fully carried along in the lending process. This is necessary because you should feel comfortable with your lender.

Get in touch with lenders and notice who responds immediately. Request for quotes and pay attention to who really shows concern and provides you with satisfactory answers. This will help you decide who you are more comfortable with.

Obtain quotes from different lenders as this will increase your chances of getting the best deal. It is recommended that you get about 5 mortgage quotes and compare. The quotes should be gotten on the same day because rates change quickly. Today’s quote may be the same as tomorrow’s quote.

Get loan estimates from the lenders to know the cost of the loan. Note that enquiring from different lenders will not lower your credit score so don’t hesitate to get multiple quotes. Use the quotes to negotiate. You can take a quote from one lender to another lender so that they can compare it. Make them know that you will settle for the one that gives the lowest rates. This will make the lenders want to beat each other’s rates. You will be the winner in the end.

After deciding on which lender to use, let the lender know when you want the closing to be so that your interest rate can be locked accordingly. If your mortgage lock period is short, your cost will be low. Mortgages are usually quoted with 30-day locks. Locking for 60 days will increase your fees so it’s better to close as quickly as possible.

You can close faster by reviewing your credit score and correcting errors in advance. The lenders’ report can help you detect errors. Gather ea the documents that the lender will need and have them ready in advance.

5. Have Steady Employment

Low-interest mortgage rates are offered based on how much you can meet the mortgage requirement. Your income and business status also affects your ability to get low-interest mortgage rates. These things determine your probability of paying back the loan.

Lenders want to see that you have steady employment. If you can show at least two years of steady earnings, they will consider you as a lesser risk than someone without steady employment and income. So those who do not have steady employment will have a tough time convincing lenders that they can pay back.