Getting the Best Mortgage Rates
How credit scoring affects your home mortgage interst rate
Calculating Loan to Value
Property Type Affects Your Rate
Owner Occupants Get a Break
If you've ever called a lender to inquire about home mortgage rates, you may have gotten a very vague answer. That's because many factors play into the rate you are finally offered. The most honest answer a loan officer can give without knowing the details is "It depends."
Should a mortgage lender quote you an absolute rate over the phone without knowing all the details of your transaction and your credit history, beware. It probably isn't true!
How Credit Scores affect your home mortgage interest rate
Lenders offer different mortgage interest rates depending on your credit score (known as a FICO score), so you need to protect it diligently. The FICO score generally accepted as "excellent" is 680. If yours is above that magic number, you'll get good rates.
However, if you can raise it even higher, lenders will be pushing each other out of the way to get your business. A high FICO score means a low risk - at least in their eyes. It also enables you to purchase properties that less credit-worthy borrowers cannot.
One common mistake would-be home buyers can easily avoid is too many inquiries on their credit reports. It's normal to be excited about purchasing a new house - and shopping for furniture, appliances, décor, and even lawn mowers.
Shopping is fine, but don't give your Social Security number to the sales person! Unless you can pay for your new furniture without financing, window-shop until your home mortgage loan is closed.
Don't put that new purchase on your credit card either - it could tip your debt to income ratios just enough to steal your new house - or at least change your mortgage interest rate. Have patience - wait.
Note* If you are thinking of purchasing a home and have some blemishes on your credit, begin now to repair them. See Building Your Credit.
However, other factors also influence the mortgage rate you can get. For instance: Loan to value.
Calculating Loan to value
While many lenders advertise 100% home loan financing - which means 100% loan to value, they will charge extra interest for that convenience.
The more money you can put down on your new home, the lower the interest rate. Again, when you have more of your own money invested, mortgage companies view you as a lesser risk and they want your business.
The loan to value calculation may frustrate you if you've found a "super bargain." For the sake of example, I'll use even numbers to show you…
Say you've found a seller who wants to move so badly that they'll sell you a house valued at $100,000 for only $80,000. Your immediate thought would be that you can get a loan for the full $80,000 and have a 20% down payment built in.
But that's not how it works. At the time of your purchase, the "value" is the purchase price - assuming that the appraisal verifies that it is worth the full purchase price.
In this example, a loan of $80,000 would be 100% loan to value - even if the seller had been mistaken and the house was really worth $120,000.
How property type affects interest rates
A house is a house, right? Not to lenders. Manufactured homes, especially single-wide models, carry a higher interest rate. Some double-wide homes, when placed on a concrete foundation, and turned into real property for taxing purposes are considered the same as "stick-built" homes and carry the same rates. It depends upon that particular mortgage company's guidelines.
Thus manufactured or modular homes that have been made into real property give you an advantage when negotiating an interest rate. However, depending upon the building regulations in your locale, the cost might be more than the savings. If you are considering installing a foundation and turning your home into real property before re-financing, calculate all the costs first. Then compare your interest rate savings to the costs.
Single-wide mobile homes located in parks are often considered the same as motor vehicles when loans are calculated.
If you're considering a mobile / manufactured / modular home as opposed to a built on site home, check with your Mouse House Mortgage Loan Consultant to learn the current rates for each. In some cases, a $40,000 manufactured home can carry a larger monthly payment than a site-built home of $65,000.
Owner occupants get a break
Owner-occupied homes can be purchased at a lower mortgage interest rate than investment properties. That's why some investors move into a new investment home purchase for a year or two before purchasing the next house and putting a tenant in the old one. Living in a new purchase for 2 of the 5 years before you sell it will also offer huge tax advantages - check with your tax accountant for the current guidelines.
If you want to invest in rentals and need tenants to make the payment, you can still do it. Just don't choose a single family home. Duplex, tri-plex and four-plex housing is eligible for owner-occupant rates as long as you move into one of the units.
Your Mouse House Mortgage Loan Consultant will help you find the best home loan at the most beneficial interest rates for your individual situation.
Mouse House Mortgage is a free service for people who are looking for a
mortgage loan with favorable rates, whether you have excellent credit or bad
credit. A friendly mortgage advisor will help you navigate your options and
access the best mortgage rates for your situation.
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