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10/16/2019

Eligibility Criteria and Tips To Get The Best Mortgage Deals

To get the best rate on a mortgage is much more than just your credit score. The mortgage industry examines your qualification as well as the interest rate you would be able to pay. The following factors are considered by mortgage lenders while deciding an ideal mortgage rate for you:

A check on your credit scores - Mortgage lending is on the basis of higher your credit score, the lower will be your mortgage rate. And as the credit scores lower, the rate of interest will rise. The best mortgage rates are available to the borrowers who have credit scores above 760.

How stable is your income? - A record of long periods of your unemployment can be a bad sign for mortgage lenders. Try to keep your employment steady and salary growing. Lenders are stricter with the ones with self-employment income. A business doing person needs to have all the business documents in place. 

Down payment - The best mortgage rates are also determined by the minimum 20% down payment rate of the purchase price of your home. Down payments below 20% tend to have a higher risk with higher interest rate and likely to pay private mortgage insurance (PMI).

The importance of cash reserves - Cash reserves in the mortgage industry include money saved in checking accounts, money in savings accounts, money market funds, or certificates of deposit. A cash reserve is measured in terms of the number of months worth of house payments saved in cash where the standard requirement for cash reserves on a mortgage is for two months.

Comparing offers will help you avoid paying more than you need to for your mortgage. Follow the tips, and you will find the best mortgage rates:

1. Early preparation will help - Before you think of buying a home, dedicate your few years in paying off your credit card balances, personal debts, and do some savings. By the time you are prepared for a house hunt, let your finances be in great shape.

2. The role of PMI - As mentioned before, private mortgage insurance (PMI) is liable to those mortgage borrowers whose down payment is less than 20%. However, what you should be aware of is that once you have gained enough equity in your house through your mortgage payments, you need not pay for PMI. Make sure you consult with your lender. 

3. Decide and act right away - Once you have found the best mortgage deal, grab it as soon as possible as the interest rate and other conditions come up with a validity. 

4. Stay alert - Besides checking your credit score and down payment, make sure to do the mortgage calculating and comparing by yourself. Do not entirely rely upon your bank, realtor or mortgage lender. You need to examine and evaluate what works best for you.

Tips to compare various mortgage deals

  • The basic rule with the mortgage deals is the more you shop, the more you save. Hence, apply for a mortgage with multiple lenders such as banks, credit unions and online lenders rather than just one mortgage lender.

  • Depending on the scoring model, you will be given 14 to 45 days or another set of time where you can shop for as many mortgages as you want. Do not worry about the harmful effect on your credit scores. Applying for multiple mortgages will have the same impact on credit scores as it is on a single mortgage.

  • As you begin to consult with a mortgage lender actively, the lender is required to provide you with a formal form having details of the loan. The form is called Loan Estimate, which generally consists of a few pages. Check if the Loan Estimate reflects the same what the lender has said.

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