How to Qualify for the Best Mortgage Rate
When you plan to apply for a mortgage, there are specific things you need to consider in order to prep yourself for the best possible experience and lowest possible lending rate. So what do you need to come out on top? The Knoxville local movers have a few insider tips on how to lock in a low rate and be viewed as a desirable lending applicant. Read on to learn more.
Credit Score of 740+
Credit scores run from 300 to 850—and the higher the score, the better you are as a reliable lending candidate. Lenders want to know that the money they are providing you up front will be paid back, which is how they determine whether or not to approve a loan application, and for how much. But just how high does your score need to be to get the lowest interest rate? Experts say that to get the best rates you'll want a score of 740 or above. Anything below 740 means added interest to your mortgage.
Debt-to-Income Ratio of 40% of Lower
Your debt-to-income ratio is basically the amount of your gross monthly income that goes toward paying debt, and if you are paying more than 40% of your income to debts owed then that is frowned upon by lenders. Pay down your debts and get credit cards under control before applying for a mortgage. Lenders want to see that you will not struggle with making mortgage payments, and the more available income you have, the better it looks.
The longer that you have stuck with your career, the more appealing you are to a lending facility. A job position needs to be held at least 2 years before it is deemed as stable. If you have been fired or unemployed in the last two years, that does not bode well with lenders. Job stability can certainly lead to a lower mortgage rate.
If you think about equity from a lender's point of view, here's what you would see: the more equity the homeowner (you) has in their home, the less risk the lender assumes. By putting in a down payment of at least 20%, you are showing significant investment and show that you are serious about the purchase. On a purchase, this means making a 20 percent down payment. On a refinance, this means having 20 percent equity and only taking out a mortgage for 80 percent of the market value of your home.
Follow our mortgage tips and you should be able to secure a low lending rate on your home purchase. Good luck!