Getting the best rate on a mortgage, is more than just comparing rates between different lenders. It also isn’t just about your credit score. As a matter of fact, lenders usually check a variety of factors to help them determine if a borrower qualifies for a mortgage and what interest rate they should pay.
Pembroke Pines mortgage rates can vary from one lender to another by a couple of percentage points depending on a number of factors. The difference can mean a lower monthly or much higher payment in the tens of thousands of dollars in interest payments over the life of the loan.
If you want to have the best mortgage rates, you have to ensure that you are well qualified. The difference can have a significant impact on how low or high your monthly payments will be.
Below are some of the factors that lenders look at to determine a mortgage rate. We have also included tips on things you can do to get the best Pembroke Pines Mortgage Rates.
Most lenders today base their financing to borrowers on tiered pricing. This means that the rates are adjusted based on various criteria. One of the criteria used by lenders is the borrower’s FICO credit score.
If the borrower has a high credit score they will benefit from a lower mortgage rate and vice versa.
According to data on myFICO.com, borrowers are likely to get lower mortgage rates if their credit score is not less than 760. The lowest credit score you can have to qualify for a conventional mortgage is 620.
Some of the things you can do to improve your credit score includes paying off your loans, cleaning up any errors that might exist in your credit report. You should also make payments that are long overdue.
Income and Employment Stability
Mortgage lenders prefer candidates that can prove they have a steady job for the past 2 years. If you have long periods where you have been unemployed, it might affect your chances of qualifying for a mortgage. In fact, a history of declining income will not do your mortgage application any favors.
If you are self-employed, lenders will be even harsher. Most lenders require that you document your earnings for the past 2 years. They will also need you to fill out a form proving that the returns you made in that period was what was reported with the IRS.
Debt To Income Ratio
Also known as DTI, it comes in two different forms, that is, the back-end ratio and the front-end ratio. The back-end ratio calculates the sum of all your monthly minimum debt payments including your proposed new housing payment, which is then divided by your stable monthly gross income.
On the other hand, the front-end ratio calculates the sum of your housing costs while negating all other debts.
Usually, banks like to see a front-end ratio that does not exceed 28% and a back-end ratio that does not go beyond 36%.
These ratios can go higher though contingent upon other factors.
As a general rule you will need a minimum down payment of 20% to get really good Pembroke Pines mortgage rates. Since mortgages are price adjusted depending on various risk factors, a mortgage that has a down payment of 5% is considered by lenders to be riskier than one that has a down payment of 20% of the purchase price. Consequently the mortgage with a lower down payment will have a higher interest rate.
The other reason why you should consider making a down payment of 20% is that if the down payment is less, you are likely going to pay for a private mortgage insurance. Read more about this topic by clicking here.
On a conventional loan with 5% down payment, this can easily add thousands of dollars to your monthly payments on a yearly basis.
Lenders usually look at cash reserves in terms of the number of monthly payments the can settle. This money could be in different places such as, savings or checking accounts, certificates of deposit, money market funds. However, money in a retirement fund is not usually considered. This is because such funds can only be withdrawn after paying penalties and taxes.
The standard requirement for cash reserves on a mortgage is two months. This means that you need to have sufficient liquid cash after closing in order to cover new mortgage payment, that is, insurance, taxes, interest, and principal for at least the next 60 days.
On higher risk mortgages, the cash reserve might be higher.
If you would like to know more about Pembroke Pines mortgage rates, do not hesitate to get in touch. Kloze will provide you the best mortgage rates in Pembroke. Our many years of experience in the mortgage industry make us your best partners.