The process of buying a home is a daunting one, especially for first-time homebuyers. It is because most buyers don’t have the liquid cash and so, they opt for mortgage loans. But mortgage loans come with the interest rate – a rate that you have to pay over the life of the loan. So, the lower the rate the better you can save.
But how could you get the best mortgage rates Houston? Here are a few tips that help you secure the best mortgage rate on your home loan.
- Make the biggest possible down payment
The larger your down payment you can come with, the less money you need to borrow from the lender, and the lower your interest rate would be. Your interest rate is partially based on the loan-to-value (LTV) of your home. For instance, if a home is worth $300,000 and the loan is for $299,000 that would be considered a high LTV and is riskier for a mortgage lender. But if the ratio is lower, you might be rewarded with a lower interest rate.
- Make sure you have an excellent credit score
Your credit score reflects your creditworthiness to a lender. Those who have a higher credit score are considered better creditworthy and so, less risk is associated with them. And as a result, mortgage lenders will be interested to offer the best mortgage rate to them. So, before you apply for a home loan program, you should try to improve your credit score as much as possible.
- Have a long employment history
Two years of consistent employment from the same employer is considered good for home buyers. Even if you haven’t been at the same job for several decades, showing that you have no or minimal periods of unemployment shows lenders they can count on you to pay your mortgage in full every month. It can help lower your interest rate.
- Prove income stability
If you can prove that your line of work is in high demand with no sign of slowing down, or in case you for work a large, profitable company, your mortgage lender will consider this when processing your paperwork. Income stability plays a crucial role in showing that you won’t be likely to miss any mortgage payments.
- Lower your debt-to-income ratios
Even with a good credit score, it is possible to build up a lot of debt. Mortgage lenders don’t want you using more than 40 percent of your monthly income on your mortgage, credit card bills, and car payments. The lower your debt-to-income ratio, the better the possibility to get the best mortgage rate.
- Shop around
There is no fixed requirement for a home loan. It varies from lenders to lenders. Finding the one that meets your needs the best can help make sure you get the best possible interest rate for your financial situation.
Besides, paying for points, building up cash reserves, closing your loan as quickly as possible are some of the other things that can help you qualify for the best mortgage rate. So, follow the tips and get the best rate on your home loan.