4 easy tips to get the best mortgage rate in 2021
The mortgage rate you get depends on several factors. These factors include your credit score, size of the loan, and mortgage product. However, one must make sure to try and get the best mortgage rate. Here, we will look at some of the most effective tips that can help you secure the best rate.
Look for ways to improve your credit score
The interest rate you get directly depends on your credit score.
It is important to note that even a small improvement in the credit score can lead to big differences in the rate. For instance, if you are able to increase your credit score from 659 to 680, you could shave as much as 0.60% off your interest rate.
Save up for a substantial down payment amount
Another excellent way to secure the best mortgage rate in 2021 is to save a good amount of money as a down payment. Generally, it is a good idea to pay 20% of the total home amount as a down payment. This helps to greatly lower the interest rate.
At the same time, it is important to ensure that you don’t put all your savings into making the down payment. After all, you still need to bear the closing expenses.
Maintain a steady flow of income
Before applying for the loan, make sure to keep all your income and employment information accumulated together. Also, try to maintain a steady income as that increases the trust of the lender. Just don’t quit your job or change jobs too often before applying for a mortgage.
Additionally, if you can increase your income at the time of loan application, that is even better. To do that, you can take up a part-time job.
Know your debt-to-income (DTI) ratio
Lenders are always very interested to know how much debt you have in relation to your monthly income. So to secure the best mortgage rate in 2021, you must calculate your debt-to-income ratio. This calculation plays a crucial part in determining your mortgage rate.
In analyzing the ratio, the lenders presume that the higher your DTI ratio, the greater are the chances of you defaulting on the loan.
These are some simple tips to get the best mortgage rate in 2021. You can even use a mortgage calculator to check what your monthly payments might look like after securing a specific mortgage rate.
