When you find an attractive property to invest some money in, taking a mortgage is usually the way to fund the purchase. However, once you take a mortgage, you will be expected to pay a fixed or variable interest on it for the term period of the loan. And in this post, we will look at how you can get the lowest interest rate on the property mortgage.
- Have An Excellent Credit Score
Your credit score will play a huge role in determining the interest charged by the bank. Higher the score, the lower rates you can get. So, if your credit score is not that good, you should avoid taking a mortgage. Instead, try to improve the score within a few months. And only when you have raised the credit score to a good level should you apply for a mortgage.
- Opt For Adjustable Rate Mortgage
When you choose an Adjustable Rate Mortgage (ARM), you will be charged a lower interest rate during the introductory period of the loan. Once the period is over, the bank will start charging you the regular interest rate. As such, if you believe that you will be able to pay off the mortgage in a short amount of time, you will be better off opting for an ARM mortgage.
- Have A Low Debt-To-Income Ratio
Together with credit score, your debt-to-income ratio will also influence the bank’s interest rate decision heavily. Even if your credit score is good, the bank can still charge you a high interest rate because of a very high debt-to-income ratio since it raises serious concerns about your ability to repay loans with all the debt burden already existing. It is advisable that you keep this ratio as low as possible. Ideally, only about 40% of your monthly income should be spent on paying off debts. That should be good enough to get a mortgage at the lowest possible interest rate.
- Make A Big Down Payment
How much you put up in down payment will affect the rate of interest charged by the banker. If you only put up 5% of the purchase price of the property as down payment, you will be charged a higher interest than if you were to contribute 25% as down payment. And as far as Keowee real estate buyers are concerned, it is recommended that you try to make at least 20% to 25% down payment on the property.
- Provide Proof Of Long Term, Stable Employment
Finally, provide a long history of employment to the bank together with proof of stable income. Banks are always looking to lend to creditworthy people. People with erratic employment and income history will always be charged higher interest rates by the bank because of their potential risk of default. In contrast, when a bank sees that you have a long, stable income history, they will be more than happy to lower the interest rate on the mortgage.