A mortgage is a huge responsibility, one in which almost every family undertakes. The length of a mortgage amortization is generally 20-30 years. Think about that for a moment. If you took on a mortgage at age 30, you would pay off your house when you’re 60. With that length of time the interest payments rack up to excruciating levels. The amount could add up to hundreds of thousands of dollars between a low interest mortgage loan and a medium or high rate. That’s why it’s crucial to get low interest rate mortgage loans.

Low interest mortgage loans don’t always present themselves when applying for the mortgage. There are things ways to make sure you have the lowest interest rate mortgage possible. One way is to know your credit score before applying for the mortgage. Another is to save for a hefty down payment. The single biggest step you can take is reducing your debt to income ratio.

If you’ve applied for any credit recently and been turned down, you should know you’re entitled to a free credit report. While the information may help reduce debt to income ratio, it won’t help much when determining what you’re eligible for in terms of interest rates. In order to determine which level of interest rate you’re eligible for (there are high and low rates), what you need to know is your FICO score. This score is determined with all the information on your credit report and it’s the biggest determination of what interest rate you’ll be paying, how much you’ll be lent, what down payment is required and the length of the mortgage. There are new credit assessment scores, like VantageScore, but banks most often use FICO scores.

Your FICO score is a compilation of your payment history, how much credit you have, or have had, the length of time you’ve used any types of credit, what credit types and how many applications for credit you have open. Scores range from 300-850. Lenders will not lend to you if you have a score less than 550~. Anything between 550 and 649 are the borrowers that receive the highest interest rates. Borrowers with scores above 650 are offered low interest rates.

While FICO scores are a big part of the determination, they aren’t the only part. The amount of your down payment plays a big part as well. A large down payment shows the bank that you have a serious investment in making payments and keeping in good standing on your mortgage. It also reduces the amount of money the bank needs to lend.

In order to find out your FICO score you have to request a specific type of credit report. The free one will not contain this information. The reason it’s important to know the score, is so you can judge if the interest rate the bank is offering is worthy of your credit score. Remember it is in their best interest to give you a higher interest rate.

Reducing your debt to income ratio (your monthly debt divided by your monthly income in percentage). This percentage of DTI (debt-to-income) must be 36% or lower. A 28% DTI can basically ask for the lowest interest rate mortgage possible.

Simply reducing your DTI percentage and increasing your credit score and your chances of a low interest mortgage loan increase tenfold.

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