Mortgage Rates in Portage MI can have a significant effect on a person’s financial health, and even a minor change can be costly. Below are several tips to help new homeowners find the best possible rate on a Kalamazoo Mortgage.
Take Steps to Improve Credit
Credit scores can determine whether a lender even reads a person’s mortgage application. A person’s credit score demonstrates their creditworthiness, and the best rates usually go to those with scores above 740. Payment and account histories, recent applications, credit use and utilization all make a difference, and paying bills on time is important.
Boost Debt/Income Ratio
Lenders also consider a person’s back- and front-end debt ratios. The latter shows how much pre-tax income goes toward the mortgage, and the number should not exceed 28%. The former number is the portion of the person’s income that goes toward all debts, and it should be less than 36%. Pay down debts to improve the total debt-to-income ratio.
Consider a Fixed-Rate, Short-Term Mortgage
Most borrowers choose fixed-rate 30-year mortgages. However, if the borrower can afford a higher monthly payment, they can get lower mortgage rates in Portage MI by choosing a shorter-term mortgage. All mortgages consist of insurance, taxes, principal, and interest, and the first two factors are the same regardless of the loan term.
Weigh the Merits of Fixed and Adjustable-Rate Mortgages
An adjustable rate mortgage is a good option if the borrower anticipates a sale during the first few years, but they should be handled with care. During the recession, some with these mortgages ended up owing more than their homes were worth, which can prevent the sale of the home.
Consider Paying for Points
Most lenders will offer a lower rate in exchange for a higher initial payment. Such arrangements are referred to as points, and each point is one percent of the loan amount. The longer a borrower expects to have the loan, the more sensible it is to pay points. However, if the person plans to refinance, sell, or repay the loan within the next ten years, paying the fees may not be a good choice.
