How to Know if You Qualify for Today’s Best Mortgage Rates
December 30th, 2008Equity The amount of equity you currently have your is a large factor when determining if you qualify for the best mortgage rates available. The recent sales in your area determine the current market value of your home. Within the past 3 months what have the houses surrounding your home sold for? Home prices are being driven down in most areas by all the recent foreclosures. Lenders judge home value based on what they could sell your home for if they ended up having to foreclose. (Measures to properly value your home are used to protect the banks in case they end up with your home. But in reality, they do not want that to happen.)
Existing home equity in a refinance or the amount down payment in a purchase is one of the factors that help determine if you qualify for today’s best mortgage rates.
Income If you were lending your money to some one there is a good chance the first question you would ask yourself is, “Will you be able to pay me back.” The same holds true for the lenders. For loans above $417,000 they want to see that your debt is no higher than 45% of your income monthly. This includes property taxes and insurance even if you pay them semi annually. The calculation does not include bills not included on your credit report such as cell phone, gas, and groceries.
Assets Personal liquid assets are a qualifying factor for a mortgage and also to qualify for the best rates available. If a borrower can afford the loan but has no room for error if something happens in their life that they can not predict such as medical bill or unplanned travel they had not budgeted for they may have to forgo paying their loan to make money available for something else. The mortgage bank will ask that you have between 2 and 6 months worth of mortgage payments saved up that you can access if needed.
Credit Score Assuming all your other qualifying factors are in line 720 seems to be the magic number to qualify for the lowest mortgage rates available. Most consumer credit reports are only from one credit bureau but this is not how lenders gauge your credit. They look at the three major bureaus (Experian, Equifax, and Transunion). Some creditors only report to one bureau so the scores at each are usually different. As a standard practice all lenders look at all three scores and take your middle score. If you have an 810 at one bureau, 725 at another, and a 650 at the third you will qualify your rate off the 725 score. Your credit score is a way to determine your willingness and ability to repay your debts. If you pay you will be rewarded with better financing options.
These are the main qualifying criteria to for mortgage loans. A great first step when applying for a mortgage is to see how you size up in each of these categories. If you are serious about getting a loan and think one or more of these areas may be in question asking a mortgage professional in the best place to start. Lending experts have the tools and knowledge to help you find a loan that fits your needs. It is our job to analyze your financial situation and work on your behalf to pair you with a bank that will lend to you and give you a loan that benefits your financial future. A home is the largest investment most people make in their entire lives. Make sure you have qualified assistance when making this decision.