Keys to a Great Mortgage Rate
Getting the best possible rate on your mortgage is almost completely within your
control, and is often times dependent on an individual’s diligence.
Start about 6 months before you plan to buy a home by getting your credit report to have a look at what lenders will see. Next, get your score above 680, at the very least, and pay down your debts. Finally, save for a good down payment plus some cash set aside to buy points, and find a good mortgage broker. In case you don't know exactly how to do all of that, don't worry, you're about to find out.
Improving Your Credit Score
Lenders will get all three of your credit reports from Equifax, Experian, and TransUnion, then use the middle score to determine your rate. The magic number for the best rate is 720, but anything above 680 is also considered to be pretty good. If your score doesn't quite hit at least 680, you can improve it in just a few months by:
- Keeping your credit card balances below 30% of your total available credit on each card.
- Using approximately the same amount of credit each month.
- Paying your bills on time.
- Correcting inaccuracies and errors on your report.
- Avoiding credit applications
Video: Tips on how to raise your credit score
Pay Down Your Debts
Lenders determine your financial ability to pay a given loan amount by looking at your debt to income (DTI) ratio. This is calculated using your pre-tax monthly income against how much you have to pay in debts each month, including loans and credit card balances, which are based on your minimum payments. If your DTI ratio is above 30%, definitely consider paying off your smaller debts and paying down your credit cards – but don't close your credit accounts as it could possibly hurt your score. Your DTI ratio can also improve with an increase in income on your application by co-signing with your spouse.
The Importance of Saving
Lenders love seeing an applicant with a 20% or better down payment, since this decreases the loan to value (LTV) ratio. Sure you probably can get a house with a 100% loan, but it will not only hurt your rate, you might also have to buy mortgage insurance, both of which will cost several thousands of dollars. Instead of paying up later, save now for a large down payment, and a few thousand dollars to buy points. Basically, one point is $1,000 put toward the principal of your loan, with each point usually decreasing your mortgage rate by about one quarter of a percent. If that doesn't seem worth it, not buying that point on a $200,000 loan will cost $500 per year – in just two years that point has paid for itself. One last and surprisingly important factor in getting the best rate is your relationship with your broker. It's a little known fact, but your broker is the person who determines your final rate. The difference in rate between what the lender will offer and what the broker can sell you is how brokers get paid – so be nice!
Video: How to calculate your Loan to Value (LTV) Ratio
Additional Resources:
Bank of America®
(800) 606 9692
EMC Mortgage Company
(713) 772-6077
CTX Mortgage Company
(206) 623-4446
The New York Mortgage Compnay LLC
(703) 330-7527
Sunset Mortgage Inc.
(607) 231-5555
Universal American Mortgage Co
(904) 739-4744
Kensington Mortgage Group LLC
(303) 221-1810
Fieldstone Mortgage Company
(888) 719-7800
Argent Mortgage Co
(216) 479-6805
Midland Mortgage Co
(405) 426-1400
GMAC Mortgage
(302) 428-3030
Wholesale Mortgage
(713) 528-7100
Long Beach Mortgage Co
(904) 279-9104
Lenders Financial
(570) 420-0166
Columbia Funding Mortgage
(425) 341-2222
HomeQuest Mortgage
(508) 839-1117
Tamaela Mortgage
(425) 369-9660
Encompass Lending Corp
(813) 960-2818
Pope Mortgage & Associates
(909) 466-5380
Capital South Funding
(803) 656-5888
Florida Mortgage Corporation
(727) 791-8800
Free State Mortgage, LLC
(919) 562-7283
