Home Loans, Mortgage Loans, and Home Financing
Buying a home is usually one of the biggest investments a person will ever make in their lifetime. It makes sense that some detailed research and preparation are in order. It's useful to evaluate the options that are available, before entering into a loan arrangement. Here are three important facts to be aware of, since they can considerably lower your rates:
- Your credit report and credit score is an important component in your home loan application. A mortgage lender usually checks all three of your credit scores and uses the middle one to calculate your rate. A credit score over 650 will help you to receive a good rate on your mortgage.
- Lenders also review your debt-to-income ratio to decide how much you can actually afford to borrow. To calculate this ratio, divide your monthly gross income by the amount you use to pay off debts each month.
- Your down payment is the third key element in the interest rate calculation process. It is calculated by viewing your loan-to-value ratio. Lenders generally will divide the amount you are asking to borrow by the price of the home you want to buy.
Improvement in these three key areas can assist you to save on your home loan. When shopping, keep this in mind: reducing your interest rate by just one percent can mean thousands of dollars in savings over the life of the loan.
