Mortgage interest rates are at the lowest point in years – but would you make the grade for a mortgage? Before you decide to go and obtain a home loan, you need to determine not just what mortgage interest rates are, but how your credit score could affect your individual home loan interest rates (along with your ability to even obtain a home loan).
A good credit rating matters
The most important characteristic you are going to have (besides a reliable steady income, naturally) if you want to be a homeowner is your credit score, together with your credit history. When you’ve experienced a little economic difficulty in the past, this could negatively influence the mortgage rates you can be eligible for, and will have a negative effect in your ability to get a home loan, as well.
First things first: Clean up your credit report
Get the credit reports from all of the 3 major bureaus (Equifax, TransUnion, and Experian), and examine carefully to ensure there are no mistakes on them. Immediately challenge any mistakes on each of your credit reports by writing to the credit bureau in question and asking that it be taken off. They’ve got to investigate and remove those when they’re found to be wrong, customarily within sixty days.
Furthermore, ask that any legitimate delinquency reportings older than two years of age be taken off; typically, delinquencies besides bankruptcies (which stay on your credit report for 7 years) don’t have to be taken into consideration and may be removed from the credit report. This should considerably improve your credit score; in return, that should provide you with lower home loan rates and an improved chance of getting a mortgage.
Your financial behavior in the past two years will be what really counts
When you’ve got employment with a decent, steady income, and you’ve shown within the previous two years that you’re financially accountable, you should have a better likelihood of receiving good home loan rates and a home loan. Even if you have got a less than stellar credit rating, there are mortgage products out there that can allow you to meet the criteria for a loan at pretty good mortgage rates. This assumes, obviously, that you’ve got a good job, have been financially dependable of late, and can prove yourself a responsible borrower so that lenders feel comfortable supplying you with a mortgage.
Usually, you will work with traditional lenders to find financing for your home, but you may also want to consider plans like those that employ FHA loans, that are specifically set up for home owners of modest means. You can even talk to a mortgage specialist for help. A specialist would ask you questions to find out what your earnings are, what you might afford to pay for a home, and where to locate the top financing based upon your situation. Even though you’ll still probably pay more for mortgage rates than people with stellar credit will pay through traditional lenders, you’ll receive the best home loan rates based upon your circumstances, and therefore might save a significant amount of money.
Finally, if what you’re really looking for is to refinance your home loan to lower your current mortgage rate and save money, a mortgage specialist can also help you figure out the best course of action based upon your own circumstances and needs.
Getting a mortgage is one of the long term investments with sure financial fruits in the future. Before you shop for a mortgage you will have to consider several things to make sure that you have a smooth application process that will not derail your investment train. Getting a pre-approved mortgage is one of the most convenient ways of achieving a mortgage with the best rates. This is because you will have an idea about the financial amounts and limits that you have to work with before your actual application is submitted. If you are within your range you shouldn’t have any disappointments.
While each country has their own laws and rules, in Canada, there exist several mortgage plans that one might choose from. There first one is variable rate mortgage where the interests rate vary depending on other economy variables. It is also possible to get a fixed rate mortgage where the mortgage is paid at a fixed interest rate so the payments are always consistent. Canadian mortgage providing institutions are very accommodating and it is possible to have the mortgage tailored to so as to get the best mortgage rates.
Getting a mortgage requires you to have some documents that best tell about your financial health. The first one you will need is your pay slip from the past few months. The second documents are the tax returns for the last two years. The third is your credit card statement which will give information about your financial health. You will also have to validate your marital status and whether you have a family to support. Last but not least is your monthly preferred budget. This is because the financial institution takes into consideration what size of monthly payment you will have to make to still have a balance between your income and your expenditures.
There are factors that would affect your suitability for the best mortgage rate. It is therefore advisable to put your financial house in order before applying for a mortgage. The first thing is your credit card score. There are several bureaus which will help you in checking the ratings of your credit score. When your reading is good, chances of getting the best mortgage at a lower rate are high. This is because your debt to income ratio is low. When your credit card readings are fair or not so bad, the mortgage providing company might increase the rate on your mortgage.
After you have fixed your credit score, the second step is to check with your property that you are securing the mortgage against. Mortgage lenders might take a home as the preferred collateral. There are some aspects of a home that depreciates in value with time – an older home may need repairs. Many times it is worth doing these repairs before applying for the mortgage. The value of the home in the current property market should be assessed to determine how much it is worth. This can be calculated using the online tools such as the online calculators for home valuation. The resultant value that you have arrived at is now an estimation of just how much the house could fetch.