Better Mortgage Rates for Low-Risk Applicants

Posted by Dan Wolf on Friday, June 28th, 2013 at 11:10am.

Even though mortgage rates have taken a sharp upward turn in the last few weeks rates are still low by historical standards. However, a high-risk borrower could find themselves approved for an interest rate that is one to two percentage points higher than the national average. To qualify for the lowest rate lenders need to see you as a low-risk applicant. There are several things to consider when determining what risk a lender may determine for you.

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Most people are aware that your credit score is the first thing a lender will look at; the higher the score the lower the interest rate. Credit scores run from 300-850. To qualify for the lowest rates you will need to have a credit score of 740 and higher. But even if you have a high credit score your debt-to-income ratio can affect the rate you qualify for.

My what-to-what you say, your debt-to-income ratio is the amount of your gross monthly income that goes toward paying debt. If too much of your paycheck is going to pay car loans, credit cards, etc a lender will be concerned that if you have a change in income or debt you won’t have enough cash to continue paying your loan, thus your risk is higher and so are your rates. You should work for a 40% or lower ratio to qualify for the lowest rates.

Stability, particularly job stability, is one thing lenders like to see. Even if you have changed employers as long as the positions are in the same industry it shows that you are stable in your career. The longer you have been consistent in your career the better for your mortgage rate.

If you would like more information on current mortgage rates or how to enter the market contact us.

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