Mortgage rates can vary based on a variety of factors. Locating a reasonable mortgage rate isn’t as simple as picking your options and making a selection. It’s a process – one that has a lot of variables that will determine what you’re even eligible for receiving. The short answer on what a good mortgage rate is? One you can afford.
What you qualify for will determine your monthly payments, as well as your interest. Obviously, a good mortgage rate is a low one that you can afford to pay without breaking the bank. That being said, let’s go over a few things you can focus on that will help you find, or qualify for, a good mortgage rate.
The most significant factor in getting the perfect mortgage rate is determined by your credit history and score. Lenders look at your credit history to verify that you can repay the mortgage, promptly. The sweet spot is around 660-ish, with excellent credit being anything above 700. The threshold for credit requirements depends on the type of mortgages and the lenders. For mortgages insured by the Federal Housing Administration, you can get a mortgage with a credit score as low as 500. Keep in mind that lenders want one thing at the end of any deal: their money to be repaid to them. A high credit score gives them the confidence you can do that and will result in a better mortgage rate.
As we said above, lenders want to make sure that you can repay your mortgage. The ability to repay a mortgage is incredibly important to lenders, so another factor they review is your employment history and income. If you don’t have a job, you’re probably not going to get a good mortgage rate (you probably won’t get any mortgage in general). The same standards also apply to your income/assets. So, what are lenders looking for in a borrower? First, you should be an employee that’s on salary; and, second, you should have maintained that job for at least two years.
Like a broken record, we will reiterate that lenders will provide you with a better mortgage rate if they are confident you can pay them back. Most lenders will look at how much debt you currently have in relation to your income, the type of down payment you can afford to put down, and your cash reserves. All of these focus on your ability to pay your mortgage. The more confident they are about your ability to pay them, the better your rate will be. The takeaway here is to live within your means, so don’t apply for a Jumbo mortgage (anything over ~$460,000) if your annual income is $30,000.
Applying for a mortgage can be a complicated process since there are several things lenders will review and look at. Knowing what lenders are looking for and making that as attractive as possible is one the best step you can take in getting a great mortgage rate.
Luckily, you have us.
We’ll work with you, assessing your situation and doing all the heavy lifting for you. Contact one of our experts today and let us help you get the perfect mortgage rate!