Mortgage interest rates are so crazy low that it seems like lenders are practically begging you to come and take their money to buy a home. Interest rates are hovering at levels that rival the lowest rates over the past 50 years. All indications from the powers that be (the Federal Reserve) indicate that rates probably won’t be jumping anytime too soon either? If this is the case then, why is the housing market still so lousy?
It is true that mortgage lenders really do want to loan you their money for a new home, they are just being really picky about it! The housing crash shed light on bad lending practices that brought down behemoth Wall Street banks and now the few left standing are being really careful. So how can you actually qualify for these fantastically low rates? Review this quick checklist:
Do you have great credit? I’m talking a score in the 700’s here.
Are you looking for a single-family residence or something like a condominium? Would this be your primary residence, a vacation home or something you will be renting out?
What type of loan do you want? Fixed, adjustable, a government loan or one backed by a private lender?
If you know you have a stellar credit score you are on the fast track to buying a home with a low interest rate. If not, there may still be hope! FHA (Federal Housing Administration) may be interested in lending you the funds still at a low rate as long as you make up for a lower credit score in other areas such as a ton of money in the bank or a really great explanation why your credit is so low.
A single-family home is your best bet to purchase these days. Lenders feel safer doling out cash to people who will depend on the home as their shelter. Second homes and rental properties are pretty low on the list of homes banks are willing to lend to as they run a higher risk of foreclosure. They’ll likely ask you for a huge down payment or hike the rate.
Your interest rate is always tied to the type of loan you are looking for. A licensed loan originator can help you figure out what would be the best type of loan for you. Fixed rate loans are typically easier to qualify for, as there is no risk for a jump in your payment down the road. An adjustable rate loan appeals to many because payments start out low for the first few years (typically 3, 5, or 7) but this is also where many run into trouble when the rates adjust at those intervals which means a possibly higher payment.
If you’re not able to qualify at the moment for a low rate loan you likely still have a decent window of time to recoup the factors holding you back. Being proactive is the key to buying a home and taking advantage of low interest rates. Rates as low as they are now could end up saving you tens of thousands of dollars down the road in interest. Why pay extra interest if you don’t have to?