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Lenders advertise low interest home loans anywhere they can find people. Yet, try applying for one of the low interest home loans and suddenly they are as scarce as three-dollar bills. Comparison-shopping is the best way to sniff them out again. However, it is important to deal only with reputable lending institution when searching for low interest home loans.
These low interest home loans do exist. However, lurking behind the scenes is the conservative underwriting team with a formula to determine if you are eligible for one of the low interest home loans. Their formula differs only slightly from one application to the next. How you score points with the underwriter depends upon how well you do your homework.
In order to navigate through the rough waters, you need to prepare for the following:
• You need to know your credit score and hold off on your application until it becomes a strong number – 740 or higher.
• You need to be prepared with a 20% down payment based on the price of the home.
• Closing costs on a first-time mortgage usually equals 2%-3% of the principal on low interest home loans.
• Sometimes, you need to give some money to the lender in order to obtain one of the low interest home loans. This is called “paying points” where a point is equal to 1% of the loan.
Finally, the underwriter studies your debt-to-income ratio. This tells the underwriter how much mortgage you can actually afford. If you have very little debt, you could realistically qualify for one of the low interest home loans
|Jennifer Mathes, Ph.D.|