When you are purchasing a house, you are always on the hunt for the lowest mortgage rate. If you are keeping a track of the current mortgage rates, then you might have noticed that the rates never stay the same. So, how do you get the lowest possible mortgage rate? Many people have a misconception that the credit score is the only factor that determines the current mortgage rates in the market. The truth is that there are several other factors that decide the mortgage rate, on the basis of which the lender will give you the loan.
Read on to find out three such major factors that affect the current mortgage rates in the market:
For those who are unaware of the term, cash reserves represent liquid money saved that is readily available to the individual. Typically, lenders demand that house buyers have a cash reserve that lasts for at least two months. It means that after you seal the deal and buy your new house, you should at least have enough money to pay for the new mortgage payment for at least two months. The mortgage payment includes the principal amount, interest, taxes, and the insurance amount. Cash reserve can include money in your checking account, savings account, and money market funds; however, it does not include a retirement fund because that you can liquidate only after you retire.
What many people do not know is that the down payment amount you pay at the time of your house purchase majorly affects your mortgage rate. If you want the best mortgage rate, then try to at least pay a 20% of the total price of the house as the down payment. The mortgage rates are based on the risk factors, so if you pay more the risk reduces, and the lender won’t hesitate to give you a lower mortgage rate.
It is observed that if you have had a stable job in the past two years at the time you apply for a mortgage, there is a high chance that your lender will be convinced to give you a lower mortgage rate. Along with a stable job, make sure that every time you change your job, you pick a new one that pays you better than the previous one. In this way, your income graph goes up, showing that you are capable of paying off your loan.
Just make sure that you have done a thorough research and have all these factors under control before you go ahead with the best mortgage quote.