When buying a home, one of the most vital problems to solve is “how do you get the lowest mortgage rate?” Since this is the largest debt you are ever likely to accrue, paying the smallest amount of interest on the loan is vital to your long-term financial health. Building wealth today starts with home ownership.
Mortgage rates don’t just get picked out of the air. They are determined by a number of factors, with your credit score as the bedrock of the number. Everything else in your mortgage rate flows from your credit score. If it’s too low, you will pay higher rates, or be unable to get a mortgage on your home.
Here are some tips on how to improve your credit score before you apply to increase your chances of getting the best mortgage rate.
Your FICO score, the most commonly used credit score, is how you qualify for loans. The number is calculated through a number of factors that you can work on improving. The basic breakdown is:
Your credit score will generally range anywhere from 400 to 800, and if you want to get the lowest possible rate, you need a score in the 700’s. You need to keep credit card balances low, and not have high debts in other areas.
Don’t miss payments either. Every payment that you miss is a slash to your credit score. Make your history of payments look great, and your score will improve. You also need to check to make sure that your credit reports are correct. These companies do make errors, and they can hurt you badly if they are not fixed. Experian, TransUnion and Equifax are the major credit reporting agencies. Check them for errors before you ever apply for a mortgage and fix those errors.
As much as you can, get rid of outstanding debt. Your Debt-To-Income Ratio or DTI should be below 43%. DTI is defined as the ratio of money that you make, against the money that you owe. Available credit is calculated into this number. You basically want to be able to show that you make more money than you owe in bills each month. If your obligations exceed 43% of your income, that’s when you turn into a bad risk for lenders and may be seen as risky to pay off your loan.
When you’re ready to buy (hopefully soon, with these rates!) call the best mortgage lender in Alabama, Mike Carey’s Alabama Loan Experts Team in Gulf Shores (901) 619-3665 or visit AlabamaLoanExperts.com to apply now. Alabama Loan Experts has the lowest rates on Conventional, FHA, Mortgage Refinances, Jumbo Loans, Debt Consolidation Loans, Rate and Term Refinances, Cash Out Refinances, and HARP Loans. We are also the exclusive home for Hero.Loan VA Mortgages and The Bank Statement Mortgage. We will come to you to close your loan. Nobody gets lower mortgage rates on better loans than Alabama Loan Experts.
The Mike Carey Team – Offices Located in Foley and Orange Beach
316 McKenzie St., Suite 118
Foley, Alabama 36535
27250 Perdido Beach Blvd. #F3
Orange Beach, Alabama 36561