Home Mortgage Calculator - How to Qualify for the Optimal Loan
Due to the financial crisis that came to a head in 2007, it is more difficult to get a loan now that it was just a few years ago. Does this mean it's impossible to get good terms on your mortgage? No, it doesn't. But it does mean that you need to know how to create the best scenario to help you secure an optimal loan.
A Large Down Payment Will Typically Yield Lower Interest Rates
Many people think that a large down payment will affect their monthly payment, because they'll be able to take out a smaller loan, but that it doesn't have much more of an impact than that. The reality is that a bank is more likely to give you a low interest rate if you put down a larger down payment. They view a large down payment as a sign that you're a lower risk. A down payment of 20% will create the best conditions for a low interest rate.
Find Out if You Qualify for FHA Loans FHA Loans are backed by the Federal Government and can come with lower than normal down payment requirements. There are a few things you need to know about FHA loans before you sign on the dotted line.
Your Credit Score is Likely to Be the Deciding Factor in Your Interest Rate
Of all the criteria banks use to determine your interest rate, your credit score is likely to be the one that has the most impact. Let's review how the credit score ratings break down.
If your credit score is below 580 then you're better off concentrating on raising it and waiting to buy a home.
There are many factors that come together when banks are calculating a home mortgage interest rate. The higher your credit is, the less they care about your income and other factors. The higher your down payment is, the lower your interest rate is likely to be. Do your research and find down payment assistance that will work for you. You can utilize a home mortgage calculator in order to determine your budget.
A Large Down Payment Will Typically Yield Lower Interest Rates
Many people think that a large down payment will affect their monthly payment, because they'll be able to take out a smaller loan, but that it doesn't have much more of an impact than that. The reality is that a bank is more likely to give you a low interest rate if you put down a larger down payment. They view a large down payment as a sign that you're a lower risk. A down payment of 20% will create the best conditions for a low interest rate.
Find Out if You Qualify for FHA Loans FHA Loans are backed by the Federal Government and can come with lower than normal down payment requirements. There are a few things you need to know about FHA loans before you sign on the dotted line.
- The loan terms and requirements vary by state, so check out the information that's specific to the state in which you'll be taking out the loan.
- For the most part, when use these loans your monthly FHA loan obligation can not exceed 31% of your monthly income. There are a few exceptions, but these exceptions apply to very few borrowers.
- As you calculate your monthly FHA loan obligation, remember that it's not as simple as figuring out your monthly mortgage payment plus interest. Many other factors will be included in your monthly obligation amount, including escrow deposits for real estate taxes, any dues payable to a homeowner's association, special assessments, ground rent, and other costs.
- FHA loans can be either fixed or ARM. As with any loan, be sure to carefully consider the terms of the loan before moving forward. Just because these loans are backed by the government doesn't mean they are always in your best interest.
Your Credit Score is Likely to Be the Deciding Factor in Your Interest Rate
Of all the criteria banks use to determine your interest rate, your credit score is likely to be the one that has the most impact. Let's review how the credit score ratings break down.
- Excellent – 720 and up. If your score is 720 there is really no reason to attempt to raise it. Lenders typically lump 720 and up into the same category of excellent.
- Good – 680-719. You'll likely have many lenders who will to work with you.
- Average – 620-679. At this point, there's still hope that you'll get decent loan terms. However, your salary, job history, and other factors will be more carefully considered than they would if you had a higher credit score.
- Poor – 580-619. You may or may not be able to get a loan with a poor credit score, but you'll be at the mercy of the lender.
If your credit score is below 580 then you're better off concentrating on raising it and waiting to buy a home.
There are many factors that come together when banks are calculating a home mortgage interest rate. The higher your credit is, the less they care about your income and other factors. The higher your down payment is, the lower your interest rate is likely to be. Do your research and find down payment assistance that will work for you. You can utilize a home mortgage calculator in order to determine your budget.