4 Key Things That Can Help You Get the Lowest Mortgage Rates in Houston

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Getting a great rate on a mortgage program can help you to save a considerable amount over the life of the loan. This is why; homebuyers want to get the lowest mortgage rate for their loan. Even a small difference in the mortgage rate can help you save a lot. And so, like any other lender, you would also want to get the lowest mortgage rate.

But how to get it the lowest mortgage rates in Houston? Here are a few things that can help you to get the lowest rate –

  1. Credit scores 

One of the main things that can lower your mortgage rate is your FICO credit score. Your credit score will help you to determine whether you can qualify for the loan and what rate you will pay on your loan. There is an inverse relationship – the higher your credit score, the lower your mortgage rate, all the other things being equal. When your score goes low, your interest rate goes up. In theory, you can qualify for a mortgage with a credit score as low as 500. But when you are looking for the lowest mortgage rate, you should try to improve your credit score as much as possible. The higher the score, the better it would be for you.

  1. Employment and income stability 

Mortgage lenders prefer borrowers, who can prove steady employment for at least the past two years. Long periods of unemployment can prevent you from getting the loan approval. It would be better if it would have been in the same job for at least the last two years or have made a job change to a higher paying position at that time. If you are a self-employed person, then you will need to show your business income with income tax returns for the last two years. When you can show your income stability, you would have a better possibility to get the lowest mortgage rate for your loan.

  1. Debt-to-income ratio 

The debt-to-income ratio, also known as DTI, comes in two forms. The back-end ratio measures the total of all of your monthly minimum debt payments, along with your proposed new housing payment, divided by your stable monthly gross income. The front-end ratio stresses only on your housing costs. Based on the mortgage and other factors, these ratios are determined by the mortgage lender. But a lower ratio helps to get a lower interest rate. So, always try to lower the DTI ratio.

  1. Down payment 

If you follow the rule-of-thumb, you have to come with a 20% down payment to get approval for a home loan program. As mortgages are price adjusted based on risk factors, a loan with a 5% down is considered riskier than one with 20% down, and so, it will carry a higher interest rate. When you want to get the lowest mortgage rate, you should try to save as much as possible and put that amount as your down payment.

So, improve your credit score, boost your income stability, lower DTI ratio, and come with a decent down payment to get the lowest mortgage rate from a home loan program.

Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.

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