Availing a mortgage has become an essential step for most people across the globe. Mortgage loan allows an individual to purchase a home that he/she can call his ‘own’. However, mortgage rates have increased to a great extent and getting these rates approved and paying the interest each month has become difficult these days. The reason is that lenders usually ask for increased rate of interest on the amount a borrower qualifies for.
There are many ways in which one can enhance the credit score and internet rate of mortgage loan. Here are some of the best tips coming straight from the experts in this field.
First and foremost, you need to understand that there are several factors that affect the interest rate you qualify for when looking for a mortgage loan. The main factor is your credit. It has the most control over. Prior to applying for a mortgage you require to revise your credit reports. The best way is to look for errors. This will let you know about where you stand.
Credit reports usually contain a record of all your financial dealings with lenders. The reports will also contain records of all your spending and borrowing habits. It also tells a lot about the way you repay your debts. Mortgage lenders require this information to measure the amount of risk a borrower is for lending the amount of money to.
Your FICO credit score is obtained from these credit reports. Mortgage lenders have their own guidelines for lending money and this is based on the credit score of an individual. The stage of your FICO credit score will be the deciding factor for lenders for mortgage loan and interest rate approval.
Improving your mortgage rate is easy, This credit score is obtained from a number of factors. Here is a proper and illustrated break down of the main factors involved in creating your credit score.
a) Repayment history of on time payments will decide 35% of your credit score.
b) The debt-to-income ratio provides 30% of credit score.
c) 15% of credit score is determined by the length of time credit has been utilized for by the borrower.
d) The type of credit a borrower uses determines 10% of credit rate.
e) 10% of credit rate is derived from the number of recent credit inquiries.
All the above-mentioned factors are directly under the control of a borrower. Hence, prior to applying for a mortgage, you should take six months in order to tune up your credit.