The interest rate you qualify for is based on any given mortgage lender’s criteria for evaluating your mortgage application. While five different mortgage lenders may come up with five different interest rates for the same applicant, there are steps you can take to improve the interest rate you qualify for. Here are the basic areas you should focus on to improve your eligibility for a better mortgage rate.
Your Credit
One of the most important aspects of your finances when it comes to your mortgage is your credit rating. Mortgage lenders use your credit score to determine how much of a risk you are for a mortgage. Your credit score is derived from your credit reports which detail all of your debt and your history of repayment. Negative information in your credit reports will have a negative impact on your eligibility for a mortgage or a good interest rate.
Your Employment
Mortgage lenders like stability in their borrowers. If you have been with your employer for at least two years it demonstrates stability in your employment. Hopping from one job to the next can damage your credit and your chances of qualifying for a good mortgage.
Your Finances
Mortgage lenders also scrutinize your finances when evaluating your mortgage application. Your income, assets, debt ratio, along with the loan-to-value ratio of your home will all be evaluated to determine your financial stability. Improving any aspect of your finances from cleaning up your credit reports to paying down your debt will improve the mortgage interest rate you will qualify for.
You can learn more about qualifying for the best mortgage interest rate and common mistakes to avoid by registering for our free mortgage guidebook: “Five Things You Need to Know About Your Mortgage.”
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
