What Is A Good Mortgage Rate?
Posted by @TopMortgageRate
6 Tricks To Getting A Great Mortgage Rate
Getting a great rate on a mortgage is about a lot more than comparison shopping. It’s also about much more than just your credit score. In fact, the mortgage industry examines a number of factors to determine not only if you qualify for a mortgage, but also what interest rate you’ll pay.
There’s a lot at stake. Mortgage rates can vary by several percentage points depending on the factors we’ll look at below. The difference can mean a much higher or lower monthly payment and tens of thousands of dollars in interest payments over the life of the loan.
If you hope to get the best mortgage rates possible, you’ll need to make sure that you are well-qualified. Below are some of the key criteria that mortgage lenders evaluate, as well as some tips you can use to improve your current standing.
Mortgage lending today is based on tiered pricing, which means that rates are adjusted based on various criteria. One of the main criteria used is your FICO credit score. Your credit score will help to determine whether you qualify for the loan and what rate you’ll pay on your loan, and there is an inverse relationship. The higher your credit score, the lower your mortgage rate, all other things being equal.
According to myFICO.com, the best mortgage rates are available to borrowers who have credit scores of 760 or above. As your score goes lower, your interest rate goes up. With some exceptions noted below, the lowest score needed to qualify for a mortgage is 620. At today’s mortgage rates, however, a score of 620 will qualify for a rate of 5.022%, while those with a score of 760 or higher will enjoy a lower rate of about 3.433%.
You can, in theory, qualify for a mortgage with a credit score as low as 500. It will require a minimum down payment of at least 10%. In order to get maximum financing on an FHA loan (a 3.5% down payment) you need a minimum credit score of 580.
If you don’t meet the minimum credit score requirements, or if you want to improve your chances of getting the best rates, you’ll need to begin monitoring your credit scores (you’ll find several free options here) and making improvements where necessary. This can include paying down or paying off loans, paying past-due collection accounts, and cleaning up any errors you discover on your credit report.
See full article on: Forbes.com