How Can YOU Get the Best Mortgage Rate?

Published on June 7th, 2017

Of course, your credit score is big factor in getting a mortgage, but there’s a lot more factors playing a major role in the process.  These are factors playing a role in determining if you qualify for a mortgage and also determine the interest rate you will be paying.

Income/Employment

Stability in your income and employment are big factors in determining if you qualify for a loan. Mortgage lenders like to see a steadiness of employment for around two years. Long periods of unemployment and declining income are red flags to lenders when examining your application. 

Lenders are strict when examining any self-employment income.  You will need to document your business income along with your income tax returns for the last two years. You may also have to complete IRS Form 4506 to verify your returns are the same as the ones you sent to the IRS.

Debt-to-Income Ratio

Debt-to-income ratio is another determinant when seeing if you qualify for a loan. Debt-to-income ratio has two components: The back-end ratio and the front-end ratio. The back-end ratio takes your minimum monthly debt payments, plus your proposed new housing payment, divided by your estimated monthly gross income. The front-end ratio includes just your housing costs, excluding your other debts. Back and front end ratios requirements can vary by mortgage program, lenders and other small factors.

 Credit Score

Your credit score is another factor in your qualification for a loan and your interest rate. Your credit score is a reflection of your borrowing behavior. A lender gets an idea of how trustworthy you are as a borrower. Credit scores of 760 and above will help you qualify for the best rates. 

The Down Payment

Down payment is also a huge factor and can alter your mortgage rate greatly. Generally, a minimum down payment of 20% is needed to get the best rate. A person with a lower-percentage down payment is subject to paying more interest than someone with a high- percentage down payment. Also, a lower down payment will most likely come with the requirement to pay PMI, or private mortgage insurance. This will result in an annual premium adding a good chunk to your monthly payment.

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