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Q: How can I qualify for the lowest Interest rate on a mortgage loan?

Fri, Feb 25th, 2011
Posted in Ask the Expert

Mary Schwarz

A: In order to qualify for the lowest interest mortgage rates lenders will look at 3 main factors.

CREDIT SCORE - A credit score of around 750 will help you qualify for the lowest rate. Your FICO score is based on 5 things: payment history, amounts owed, length of credit history, new credit, and types of credit used. Any past due payments or accounts in collections can have a devastating impact on your score. Get current and stay current on all of your payments. The longer your bills are current and paid on time, the better your score will be.

LOAN TO VALUE - In order to qualify for the lowest interest mortgage rate possible, you will need to have saved a down payment of at least 20% of the home's value. It is possible to qualify for a mortgage with as little as 5% down, but you will not be getting the best rates. Lenders charge different interest rates to different individuals based on their perceived risk.

DEBT TO INCOME RATIO - This a measure that compares the amount of money that you earn to the amount of money that you owe to your creditors. Lenders generally prefer a 36% debt-to-income ratio, with no more than 28% of that debt dedicated toward servicing the mortgage on your house. A debt-to-income ratio of 37-40% is often viewed as an upper limit, although you still may qualify for a loan.

You can contact Mary Schwarz, Sarah Mensink, or Aaron Armstrong for all your financing needs at F&M Community Bank, NA.

100 St. Anthony Street N., Preston 507 765 3823

229 Main St. N., Chatfield

507 867 1605

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