5 Keys to the Lowest Rate
What goes into getting the LOWEST rate from your lender? There’s a lot! Different lenders take different thing into consideration. But. For the most part, lenders will consider your ability to repay, your collateral, and your credit history as part of their determination of your rate.
Here are the 5 Keys to the Lowest Rate
1) Review your Credit Report
Did you know you can review your credit file each year, for free? This isn’t part of CreditKarma.com or other Credit Monitoring services. With www.AnnualCreditReport.com you can view all three credit files once a year. What should you be looking for? Mistakes! You should know everything about everything that’s on your file. If you don’t, file a dispute!
2) Improve your Credit Score
Do you know how your Credit Score is determined? It’s an algorithm designed by the credit companies to assign likelihood as to repayment of debt. How do you improve your credit score? Easy! Pay all your bills (at least the minimum payments) on time. Keep your credit card balances less than 30 or 40 percent of the limit. Don’t apply for new debt too often.
Related: How to Increase Your Credit Score By 100 Points Or More - Quickly!
3) Reduce your Debt to Income Ratio
Have you ever heard of a Debt to Income Ratio? Loan officers call it DTI. There’s a lot of varying opinions on the perfect ratio. Loan officers are looking for a low DTI Ratio. How is my DTI Ratio calculated? Simple. Take all your monthly minimum payments to creditors and divide that by your monthly income before taxes. Here are some of the most common types of debt that are included in a DTI Ratio calculation: car loan payments, credit card payment, mortgage payments, student loan payments, and any other type of financial obligation that you pay.
How do I reduce my DTI Ratio? Get lower car loan payments (or pay it off if you can!) Pay down credit card balances. Pay off student loans. Every situation is unique. It’s always best to discuss these decisions with your loan officer.
4) Improve your Income
Lenders want to see an ability to repay the loan. It’s not enough to say, “I’ve always paid my bills!” To get the best rate, you need to improve your income.
How do I improve my income? For starters, it usually takes time. However, if you get promoted or get a new job (in the same line of work), the increase on your paychecks will help improve your income!
Self-Employed? It’s probably best to call me at (630) 262-0401. Self-Employed borrowers’ income is a little tricky and I would love to talk through the details with you.
5) Put More Money Down
Possibly the fastest way to qualify for a lower rate is to put more money down on the home you’re looking to buy or towards your principle loan amount when refinancing. Putting more money down literally improves the Loan to Value Ratio of your file.
Related: Low and No Down Payment Mortgage Options
What’s Loan to Value? Loan to Value is the ratio of your loan amount to the value of your property. Each lender and loan program are going to treat this metric a little differently. But! In almost every case, the better this ratio, the better your rate!
6) (Bonus) Ask me about Paying Points
Some clients have heard that paying points to a lender is a terrible idea and should never be considered. In most cases, paying points actually improves the rate and lowers your monthly payment.
Contact me for more information on how to get the Lowest Rate for your next mortgage loan!
Want to see if I can save you money on your current mortgage? I’d love to help! Call me today. (630) 262-0401