Why Do My Friends And Family All Get Approved For Different Mortgage Rates?
Do you ever wonder why your friends and family get approved for mortgages with different rates? Do they have different income levels, credit scores, or employment histories than you? Do they have higher or lower monthly expenses than you? Or is it just that your mortgage lender doesn't think highly of your financial history? This article is tailored to help you answer some of these questions.
Do you ever wonder why your friends and family get approved for mortgages with different rates? Do they have different income levels, credit scores, or employment histories than you? Do they have higher or lower monthly expenses than you? Or is it just that your mortgage lender doesn't think highly of your financial history? This article is tailored to help you answer some of these questions. There are specific reasons why certain people get approved at lower rates or higher rates than others. We will explore some reasons your friends and family get approved for different mortgage rates.
Credit Score
A credit score is a number generated by a credit reporting agency based on your financial history. The higher your score, the better it is for you. To make sure you're approved for mortgages and other loans in the GTA , you should aim to keep your credit score high or at least average — 670 or above is ideal. You'll likely be able to get an easier mortgage rate and save thousands of dollars over time with a good score. If you're having trouble keeping up with bills, don't be afraid to talk to creditors about changing payment terms — they often have room to negotiate if they think they can get some more money out of you down the line.
Down Payment
When applying for a mortgage, many lenders will require a down payment. The down payment is an upfront cost paid when applying for a loan that shows your serious intent to purchase real estate. The amount of money you need to put down can range from 5% to 20%, depending on several factors, including your credit score and annual income. If you can put down up to 20% of the purchase price as a down payment, your mortgage interest rate will be lower than others.
With each lender offering different rates and programs, it's in your best interest to determine how much you'll need for a down payment before shopping around for mortgage loans.
Debt to Income Ratio
If you have high credit scores and solid income, you might be able to break out of the mold—but there's always a risk when doing so. Your debt-to-income (DTI) ratio measures how much money you owe versus how much you make. A lower DTI means that your payments are a smaller percentage of your take-home pay. Because it's such an important part of mortgage qualification, ask your lender what they expect for DTI and whether there are any outliers or exceptions that would allow you to qualify despite exceeding those percentages. In general, lenders want a DTI under 40%—though some may allow up to 44%.
Current Mortgage Balance
If you are looking to refinance your mortgage and want to save money on your payments, your current mortgage balance is one of the first pieces of information you should share with your lender. It helps lenders assess whether or not you can afford a new loan and how much more they will lend you. In addition, if you have paid off some of your original mortgage debt, that’s information that could help, improve their assessment of what kind of loan terms you can qualify for.
Current Employment Status
Many mortgage companies will review your current employment status and credit score to determine whether you're a good candidate for a loan. This can be frustrating because you may have stellar credit but not be able to get approved for a mortgage due to job insecurity. If your employment is tenuous or you have gaps in employment, know that you have options. You might need to save more money or refinance later on if things don't pan out as expected, but there are resources for those with less-than-perfect jobs and credit scores.
Properties Owned By the Applicant
Properties owned by your household and household members are a red flag for lenders. If you're self-employed, you may be tempted to take out a loan in your business name and have it secured against your property—but even if you own that property, lenders will still view it as a negative factor. Just be upfront with lenders: If they ask if your friends or family own property on which you plan to secure financing, don't lie. No one will hold it against you; make sure all the bases are covered before applying for mortgage financing. The more honest you are when applying for mortgages, the better your chances of getting approved at an affordable rate!
One common reason applicants are turned down for a mortgage is not having enough money to pay all closing costs in cash. In some cases, lenders will provide these funds in advance of closing, but it's more likely that you'll need to fund them yourself at escrow. Ask your lender what their policy is and how much they require you to have on hand. It may also be worth getting pre-approved, so you know exactly how much house you can afford based on your income, credit score, and other financial factors. You can then figure out what you'll need to save up overtime to come up with those funds when it comes time for settlement.
Current Home Value
Your current home value influences your mortgage rate. The higher your home's value, the lower your interest rate is likely to be. If you just bought a new home and know its market value, use that as your starting point when applying for a mortgage—but make sure you have proof of its appraised value since that is often required for loans in certain markets. If you're unsure what it might be worth in today's market, consider getting an estimate from a real estate agent. Once you know what it's worth today, calculate how much it was worth when you bought it to estimate how much equity you built up in your home between buying and selling dates.
Buyers Plans
Different buyers have different plans for their home purchase, which means mortgage rates can differ depending on whether or not you're buying a primary residence, vacation home, rental property, or investment property. Before shopping around for mortgage rates and terms, know what kind of buyer you are. It's also important to make sure your loan officer is equally aware of your type of buyer; many people who purchase homes in GTA assume that all lenders offer similar mortgage rates and terms when they don't.
Location of the House
Interest rates can differ depending on the location of the property you want to buy. The state and whether the property is in an urban or rural area are two major critetia. There are several reasons why your geographic location can have a significant impact on the interest rate you qualify for. One reason is because each state has its own foreclosure rules, which can have a significant impact on how a borrower can foreclose on a defaulted property.
Wrap-up
There are a lot of elements that go into setting mortgage interest rates in the GTA, and knowing them might help you pick the best mortgage plan for you. It's vital to realize that any combination of these factors could affect your mortgage interest rate. Consultation with a loan expert is the best approach to find out what your rate will be.
If you're looking for a the right mortgage for you click the link below to see which lender is most likely to approve you.