Posts tagged: home loans with low interest

Low Interest Home Loans

Fractions of a percentage point on your mortgage rate can mean saving tens of thousands of dollars in interest ove rthe life of your loan, so it’s definitely worthwhile to hunt for low interest home loans. Of course, lots of factors go into whether the loan you’re looking for exists, and whether you qualify for it.

There are two types of loan we’re talking about here. First, you have the homeowner who already has a mortgage and is looking to refinance into something with a lower interest rate. What are the factors to consider here?

Above all else, this is a matter of timing. If you want a low interest home loan you need to be watching the rates like a hawk. Working with a savvy mortgage broker will help with this part of the process – once you have all your qualifying paperwork taken care of and it’s been through underwriting, you really just need to work with someone who has a good sense of the direction rates are heading. This is one part of the mortgage process determined by the Fed and the free market – no amount of down payment, proof of income, or Fico score will make a shread of difference beyond  a certain point. So keep your eye on the rates, and lock it in when the day’s rate sets you up with the lowest possible monthly payment.

But what about that qualification process? If you’re trying to refinance, the underwriters are going to be almost completely hung up on two questions:

How much equity do you have in your home?

What’s your credit rating?

They’re not as concerned with your income (although they will verify it). The thing about income with a refi is you wouldn’t be doing it if your payment wasn’t going to go down, and they’re assuming you can afford your currrent payment.

Equity is a funny thing. Whether you’re looking to refi your entire loan or just open a low interest home equity loan, the amount of equity you get credit for is somewhat subjective. The standard way of valuing your home will be to look at the sale prices of comparable homes in your area sold during the previous weeks and months. They’ll tell you how much your house is worth, subtract the amount you owe, and there’s your ‘equity.’  You better hope it’s a positive number. :)

If a bank is going to let you refi they’ll want you to have at least 20% equity compared to your loan amount. I’d strong encourage you not to take new cash out, even if you have ‘extra equity.’ Talk about the perfect way to stay in debt till the day you die.

So that covers people looking to refinance with a low interest home loan.

What about new home buyers?

It’s really not too different. Bring a 20% down payment and a 700+ Fico score to the table, and you’ll be in good shape. Happy house hunting.