Many first-time homebuyers think that getting the lowest rates is all about having a phenomenal credit score. But while that is essential to scoring a low-interest rate, your credit report isn’t the only thing that matters.
There is so much more to getting the best mortgage rates in Michigan than you think. Lenders look for a combination of factors that help them decide your interest rate.
If you want to score the lowest possible rate available to you, do the following.
If you need time to get your finances in order, you’ll have to put off house-hunting for a bit. This will give you enough leeway to increase your credit score since even a 20-point increase can push down the rate by 0.25%.
Prove your Financial Stability
In general, lenders prefer that you have been making a stable, if not steadily increasing, income from your job for the last two years. For self-employed homebuyers, you will have to show your income tax returns, which lenders will verify with the IRS.
Boost your Cash Reserves
Borrowers are required to have at least two months’ worth of monthly payments to be qualified for a mortgage. These cash reserves are typically accepted in the form of savings and checking accounts, money market funds, or certificates of deposit.
Increase your Down Payment
Paying a 20% down payment will generally land you the best mortgage rates. It also allows you to skip having to pay private mortgage insurance, which goes somewhere to the tune of around 1% of the entire loan amount, or around several thousand dollars, depending on the size of the loan.
Once you find an interest rate you are happy with, don’t delay. Conditions are locked in within a certain period, but they can quickly change so there’s always the risk of losing out. When you know you have the best rate you can get, don’t hesitate about closing the deal right away.