How can you get the best interest rate for your mortgage?
While it can seem rather complex to get a good interest rate for your mortgage, that is not exactly the case. But you must realize that this is more than just comparison shopping. You will have to deal with lots of different things that may have a massive impact on the overall interest rate. But if you want to keep that interest rate low, here are some great things to focus on.
Make sure that you have a good credit score
The better the credit score you have, the lower the interest rate you will gate. myFICO states that the best rates will come for people that have a credit score over 760. Your rates will still be good if you are around 740 or even 720, but as you decrease the credit score value, the interest rates will get higher. So, your primary focus is to keep a very good credit score. Repay all your debts and stay away from any unnecessary loans, as this will make it easier for you to increase your credit score.
Lock in the lowest rate at that point
Some people end up waiting for lower interest rates, but the reality is that the market is shifting all the time. Right now, you may have a low rate, but the rate can get even lower in a month or two. But, as usually tends to happen, the interest rates can increase quite a bit. So, it’s a good idea to stop waiting and start acting. Stick to the lowest rate you can find now and start the process.
Get the best debt to income ratio
You should have a DTI ratio of less than 28% if you want to get the best possible interest rates. On the other hand, the maximum DTI you can have is 43%, but obviously, that will lead to a higher rate. That’s why you must keep the amount of debt in your life relatively low. If you can keep it under 28% or even 20%, you are bound to acquire some incredible results in the end.
Down payment value
Every person has a different financial situation, so it’s obvious that some people can afford a bigger down payment. As a rule, the more money you offer as a down payment, the lower the interest rate will be. And, as you can imagine, the lender will be a lot better with offering you 80% or 70% of the house value instead of 95%. Yes, the bigger the down payment you can have, the lower the interest rates will be in the end.
Do you have cash reserves?
In case you want to keep the interest rates as low as possible, make sure that you have cash reserves. These include money you have in savings or checking accounts, certificates of deposit or money market funds. Basically, if you have some extra money aside from the down payment, the lender will be ok with offering a lower interest rate. This way you show the lender that you can repay the loan, and you have the reserves to do it if something goes wrong.
These tips will help you lock down the best interest rates for your mortgage. Don’t hesitate and apply them as fast as possible. With the right approach, you will be able to acquire some very good results. Do that, and you will surely appreciate the overall results!