Steps to Secure a Low Mortgage Rate

Oct 07, 2013 No Comments by

Getting a mortgage has become much harder since regulators tightened lending rules and institutions became more cautious in the wake of the financial crisis. In addition to this new reality, rates have begun rising from their all-time lows, decreasing the chances of obtaining a great rate. However, it still can be done, although preparing your finances before you apply is now imperative. Therefore, HomeServiceWorld is publishing several articles on what you can do to get the lowest mortgage rate possible for your home.

 

Have 6 Months of Stable Credit History

Financial advisors recommend demonstrating six months of stable credit history when applying for a mortgage. When deciding whether to approve your loan, banks analyze your spending habits for red flags. Even mundane changes, such as using your credit card to purchase your medications when you never did before, could signal financial distress to risk managers.

 

Keep a Low Debt-to-Credit-Limit Ratio 

Try to use only a small percentage of your credit limit; 50 percent of your total limit should be the highest amount you allow yourself to spend. In this economic climate, lenders are wary of loaning money to a high-risk borrower, and they determine how well you live within your means by dividing the sum of your debit balances by your total credit.

 

Don’t Open and Close Accounts

However, opening and closing accounts solely to improve your debit to credit ratio could hurt more than it helps. For example, closing the card that you’ve had the longest will make your credit history younger and therefore reduces your perceived reliability. Closing credit cards that do not have a balance decreases your total credit limit, which hurts your debit-to-credit ratio.

Furthermore, lenders may view opening new credit card accounts as a sign that you are having trouble paying your bills. Remember that department store cards offering discounts may not be worth the savings if they lower your credit score.

 

 

 

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