Understanding How to get the Best Discount Mortgage Possible

In the current economic market, buying a house has never been better. The predatory lenders aren’t as prevalent as the early 2000’s and with the economy just bouncing back, investing in a house is easier than ever (and cheaper). The prime rate is low, which means it’s a great time to buy a home with discount mortgage rates. However, there are still things to consider. Just because the prime rate is low doesn’t mean you will automatically get the best discount mortgage. In order to qualify for a good mortgage rate, and receive a good quote, it’s essential to understand what your options are and how to get the best mortgage rates.

The FICO score is the number one most important factor in determining your interest rate and fees. The FICO score is the combined score of your past credit history (past due payments etc), current types and amounts of loans, how many outstanding applications you have and how long you’ve had a credit history. The FICO system has a score that ranges from 350-950. Normally the lowest possible score for a loan is 500. Mortgage rates for scores below 620 are always the poorest rates possible. Raising the FICO score by just 20 points can sometimes add up to $100,000. Although the largest part of a lending decision, mortgage rates aren’t just based upon your credit score.

When deciding how much, what interest rate and what fees apply to the mortgage. Mortgage terms are part FICO score, part debt to income ratio, part job and home stability. All of those factors can be controlled if one is willing to wait long enough to apply for a loan.

To get the best discount mortgage rate, raise your credit score, fix your debt to income ratio and try to stay in your job and current residence as long as possible. Even if you’re renting, try to stay in a place. If your score is lower because of past due payments, get a secured card and make the payments on time for 12 months. If the problem is how long or what types of credit you have, close any low limit credit cards and wait until you have a more established history. Reduce your debt to income ratio to 36% or lower (preferably 28%). This ratio is determined by dividing your total monthly debt by your recurring monthly gross income.

Before considering a mortgage, be sure to get a credit report. Once you know your credit score you have most of the information to get the best discount mortgage possible.

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