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Factors Considered when Deciding Mortgage Interest Rates

One may need to go beyond comparison shopping in a case where he or she expects great rates on his or her mortgage. In the same line, your credit score affects only a portion of whether you get good mortgage interest rates or not. It would be essential for one to know some of the critical aspects modern mortgage lenders focuses on when determining the mortgage interest rates. One may be amazed at how he or she can save tens of thousands in knowing how mortgage interest rates works. One would need to begin by the prequalification stage. It is essential to know some of the critical aspects mortgage lenders consider in coming up with mortgage interest rates.

Among the major aspects most lenders tend to consider is the credit score. It is essential to note that mortgage is more of a tiered pricing meaning that different rates tend to come as a result of different criteria. The credit score tends to be used in determining whether one is capable of paying a mortgage or not. People with higher credit scores tend to be assured by many mortgage lenders of lower mortgage interest rates. That tells you that as credit scores go lower, the mortgage rates tend to go higher. Where one has enough time, he or she would need to begin by working on his or her credit score. People with more stable income tend to enjoy lower mortgage interest rates when compared with those with unpredictable income. In most cases, self-employment income tend to be perceived by many lenders as high risk and hence mortgage lenders tend to be very strict.

The debt-income ratio is another thing that tends to be used when processing a mortgage loan. The debt income ratio tends to be divided into two. One of the ways is the back end ration which looks at the monthly minimum debt payment and the housing payment which is then divided by the monthly gross income. The front end ratio on the other end tends to focus on the housing cost less all the other debts.

Down payment is also another factor most mortgage lenders tend to consider. The higher the down payment, the lower the mortgage interest rates and the lower the down payment, the higher the mortgage interest rates. You may also need to note that cash reserves may also be used when determining the interest rates of your mortgage.

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