GET THE BEST INTEREST RATE ON YOUR MORTGAGE!

 

For first-time home buyers, the loan amount is a key consideration. But the interest rate is equally important for calculating monthly mortgage payments. It pretty much defines whether you are going to move forward on the property or not. Follow these simple tips on securing the best interest rate on your new mortgage!

High credit score A high credit scores demonstrates good financial standing, and financial security. Lenders will offer lower interest rates to those individuals, that represent the lowest financial risk, in order to safeguard their loans. Make sure to keep your credit score as high as possible. And keep the credit history squeaky clean!

 Low debt-to-income ratio The lower your debt-to-income ratio, the lower your interest rate will be.Generally speaking, consolidated outgoings should not exceed 40 percent of your monthly income. So, your credit card bills, personal loan, home mortgage and car payments should all fit within that 40 percent. Try to clear a couple of smaller loans before taking out a bigger mortgage, to qualify for a lower rate.

Work on your cash reserves Ideally your savings should provide financial cover for 6 months, meaning, you will be able to meet your financial obligations for 6 months even if you are un-employed for some reason. Someone with $50,000 in savings and $4,000 in monthly outgoings is a stronger candidate, than someone with say, $8,000 in the bank and similar outgoings. Remember, a dollar saved, is a dollar earned!

Fixed or adjustable rate mortgage? Many adjustable rate mortgage (ARM) loans offer interest rates lower than that of a fixed rate mortgage, in the introductory period. For those planning to pay off the mortgage in a short amount of time, ARM can be the better option, by taking advantage of lower rates during that introductory period.

Maximize the down payment Interest rate is partially based on a home’s loan-to-value (LTV). If you lower your loan’s principal amount, the interest rate will be correspondingly lower. If a home is worth $100,000, and the loan is for $80,000, the LTV is very high and it presents a riskier investment to the mortgage company. But if the loan is for $40,000, you can qualify for a lower interest rate.

Sustained employment record Secure and sustained employment with large and recognized companies (for example Inc 500 companies) is a key consideration for processing loans. Income stability and steady employment represent financial security to lenders. They can count on you to pay your mortgage in full every month, if you remain gainfully employed. And even if there are small gaps in employment, your cash reserves and credit history will act as guarantors in your favor!

Shop around for loans Lending criteria vary with lenders, and it is worth doing your research to finding one that meets your requirements. Some lenders will offer lower rates, but loans will require some form of collateral guarantees or other financial security. Others will not ask for too many sureties, but the rates will be higher based on the risk factor. Shop around to make the right choice for your mortgage. It really isn’t the brain surgery it is made out to be.

Happy hunting!