How to Get the Best Mortgage

Lower Rates, Save Money, and Acquire the Greatest Deal

Jul 16, 2009 Bryan Parker

Prospective homeowners are constantly searching for ways to save money. Learn how to lower rates, get the best mortgage deal, and save funds.

The mortgage application process can be tough. However, if the prospective homeowner is financially prepared, the process can be rather painless on the pocket book. Learn how to get a better mortgage deal by lowering rates and saving money.

Have a Good Credit History

What does credit have to with a mortgage and owning a home? The answer is…plenty. Lenders usually run a check of the individual’s credit and use the results to calculate the mortgage rates. Prospective homeowners are well suited to have a credit score of no lower than 650.

If a prospective buyer has a score of 750 or higher, that individual has a great opportunity to receive lower rates. The better the credit score, the better the rates. Solid credit scores are paramount in the mortgage application process.

Understanding DTI, Reduce Debt

The debt-to-income (DTI) is yet another important factor lenders will examine. The DTI ratio shows how much an individual can afford to borrow. The ratio is achieved by dividing the potential borrowers monthly pre-tax income by the overall amount used to pay off various debts. Money used to pay off credit card debt and automobile loans are some primary examples.

If a prospective borrower has a ratio of below 30%, that individual will have a much better opportunity to receive a quality deal on a loan. Prospective borrowers with a high DTI score are encouraged to pay off as much debt as possible before applying for a mortgage.

Prospective borrowers are encouraged to pay off debt, but keep credit card accounts open. Closing accounts can severely damage an individual’s credit score which will put the prospective borrower in an even worse financial situation.

Loan-to-Value Ratio

The final important factor to receiving the best mortgage with reduced rates is an individual’s down payment amount. Down payment is determined by what is known as loan-to value, or LTV. Lenders calculate a prospective borrowers LTV by dividing the amount the potential buyer is asking to borrow, by the price of the home that individual wishes to purchase.

Lenders encourage borrowers to have an LTV over 80%. If a prospective borrower has an LTV below 80%, the individual will be expected to pay private mortgage insurance. However, a prospective buyer can increase his or her LTV by increasing the down payment, or simply finding a less expensive residence.

Solid Mortgage and Low Rates

When a prospective homeowner follows these basic steps, he or she will most certainly have a better opportunity of owning a home and obtaining a great deal. As with any financial decision, home or otherwise, it's important to do the proper research. If an individual can stay on top of his or her financial circumstances, things will be better for all parties involved.

Buying a home is one of the biggest purchases anyone can ever make. Turn that "dream home" into a reality by following basic financial tips and developing a proper cost-effective strategy.

Source

Credit.com

The copyright of the article How to Get the Best Mortgage in Mortgages/Loans is owned by Bryan Parker. Permission to republish How to Get the Best Mortgage in print or online must be granted by the author in writing.