The housing market and mortgage rates have been and will continue to be in constant flux. Due to the historically low interest rates, it is an ideal time to get a mortgage loan for the house of your dreams, investment property or vacation home.
Lenders still have a keen interest in your financial responsibility as a borrower, so there are different qualities they need to consider before concluding whether or not you can afford to repay the loan. With that in mind, here are some mortgage interest rate factors you can control and improve to boost your chances of getting a competitive loan.
Mortgage Interest Rate Factors
- Credit Score. You have full control over your credit score, one of the most important factors in representing your risk level to lenders. The higher the credit score, the better chance you have of getting a lower interest rate. In that regard, you will need to improve your credit score if you have a less-than-desirable history by keeping up with monthly payments, increasing your credit limit, securing a credit card, updating your credit report, and more.
- Debt Ratio. Juggling multiple debts simultaneously can certainly make an impression about you in the eyes of lenders; It’s up to you. Lenders like to see how you manage debt, for better or worse. Properly managing multiple debts is highly desired by lenders. It says so much about you as a borrower, in a good way. Be careful though, lending/underwriting guidelines provide that no more than 41-43% of your monthly gross income be used to pay all your debt obligations. That includes credit card minimum payments, student/car/unsecured loan payments and your proposed mortgage loan payment. So be sure to pay off or pay down some of your obligations like car payments, credit card debts, and more before applying for a mortgage loan. This will help you be not only more qualified but you will qualify for a larger mortgage loan, which means more buying power. Last tip, pay your obligations prior to the due date and keep your usage below 30% of your credit limit. (10%-15% is most impactful to raise your credit scores making you even more qualified for loan approval).
- Down Payment. If you have dedicated savings for your future home’s down payment, then you have a higher likelihood of lowering your interest rate. Meeting the 20 percent down payment instead of giving only 10 percent, for instance, lowers your risk level and gives you a loan with better rates.
The Bottom Line: Getting a Mortgage with Lower Interest Rates
Buying a home for the first time is truly a wonderful experience. Obtaining the right home loan for you is crucial since it ensures you can unlock the home of your dreams within a budget you can afford to pay down the line. With that in mind, you need to work with the right mortgage lender who can guide you through the mortgage process with little-to-no complications along the way.
Your Mortgage Expert in Farmington Hills
MMS Mortgage Services is a licensed mortgage lender in Michigan and beyond. We understand all the lending requirements and deadlines; that’s why we strive to deliver the best mortgage services in Michigan and help borrowers like you get the funding that suits your unique needs. Please call (248) 788-0800 or toll free at (800) 945-4506 then press 2, to schedule your free consultation, and see how we can help you stay on top of your finances, whether it’s your first time purchasing real estate or refinancing your current mortgage, we can develop the best mortgage plan for you!
