Qualifying For Low Home Mortgage Refinance Rate
There are several factors that play an important role in determining a home mortgage refinance rate. If we study it closely, we find that there are basically two main reasons why people choose to go for refinancing. They either want to consolidate all their debts or they want to substitute their existing loan with a new one that charges a lower interest rate.
However, sometimes, people also go for this option in order to extend the repayment period and lower the monthly installment. In such cases, they do not even mind paying a higher rate of interest on the mortgage refinance loan. However, the third set-up is rare to find and usually not a very prudent one as well - unless the financial situation is really very bad. No matter what is your reason, you would definitely want to go with a lender that offers you a low rate. It is important for you to understand that qualifying for a lower home mortgage refinance rate is not a matter of luck. There are several factors that you need to look into. Let me give you a brief insight into the same.
Mortgage History
Mortgage history is one of the most important factors in this regard. In order to qualify for a low rate, the following two points are taken into consideration.
- You must not be using more than 90% of your home equity.
- You must have made your mortgage payments in time. The payments must have never been more than 30 days late.
Consumer Credit History
However, it is not just all about mortgage history. The consumer credit history also plays a very crucial role in determining the rate of interest. Having several consumer credit late payments on your credit record is not a good sign.
Debt To Income Ratio
Debt to income ratio is another big thing that is considered by the lenders to approve a loan with low conforming rates. If you find it difficult to figure it out, you are recommended to use a mortgage refinance calculator. All you have to do is just add up all your dues and debts like existing auto loans and mortgage, dues on department store cards, and debts on credit cards. You can now get the debt to income ratio by dividing this total amount by your gross pre-tax income. If the ratio is above 45%, you have a greater chance of getting the loan approved to you at a lower rate. The greater this ratio, the lower will be the rate.
Overall, if you are aware of all these factors, and meet the set criteria, you can easily qualify for a low home mortgage refinance rate.