Some believe that buying a home is a situation where the buyer has limited ability to determine how much he or she will end up paying in monthly mortgage payments. In reality, this is not the case, and there are a lot of things that a first time buyer can do to get better deals on mortgage loans than they may have imagined.
It is true that some variables affecting the mortgage loan rate for first time home buyers are out of the buyer’s control. These are related to the market and the economy. However, it is possible to watch rates carefully and to be positioned to move quickly to become preapproved when interest rates are at a favorable level.
There are three factors that are directly in the control of first-time home buyers. Paying attention to these issues and working on them as far in advance of home buying as possible will have positive results.
Debt-to-Income Ratio
The lower an individual’s debt-to-income ratio is, the lower the risk for the lender of a default on the mortgage. This often allows for a better rate. By knowing how much you bring in and how much you are committed to paying each month, you can determine if you will be comfortable making monthly mortgage payments.
Credit Score
Most conventional mortgage loans for first time home buyers will require a credit score of 620. FHA loans will require a credit score of above 500, with a score of 580 or above requiring just a 3.5% down payment.
Improving your credit score by checking reports and disputing errors, paying down your debt on existing accounts and not opening up any new accounts will help to get a better rate.
Finally, the last consideration is the down payment. The more any home buyer is able to put on the down payment, the better the interest rate and options they have for home mortgages.
At Guaranteed Rate, we offer the ideal mortgage loans for first time home buyers based on your credit score and other factors.
