What's in Your Rate? (Part 2)

Yesterday we shared 13 of the 26 factors that affect your rate. Today, we're sharing the other 13! So, here goes:

1. Co-borrowers – will there be other people on the loan, and if so, what does their credit look like? All parties involved in the loan will be used in determining the rate.

2. Debt Ratio – how much money is made monthly versus the cost of monthly bills. The typical ratio that lenders looks at is 42%.

3. Housing Ratio – what does the ratio from above look like when you add in the cost of the mortgage? Usually a good housing ratio is 28%.

4. Improvements Needed – this will affect the value of the property. Remember from yesterday's post that the lower the percentage of the loan amount to the value of the property, typically the better the rate.

5. Employment Type – self-employed, hourly employed, bonus-based pay – these all affect the risk factors of whether you’ll be able to pay back the loan.

6. Employment History – this also affects the risk to the lender. If you show a consistent history of employment, the better chance for a lower rate.

7. Documentation Available – are you able to produce all documentation (bank statements, taxes, retirement accounts, etc.) to show your assets? This will help ease the risk factors for a lender and help lower the rate.

8. Relocation – are you being temporarily or permanently relocated by an employee? That will determine if the house is considered a secondary (higher rate) or primary residence (lower rate).

9. Seller Contributions – if the seller is able to contribute money towards closing costs, that will increase the amount you have available for a down payment.

10. Gifts – again, lowering the amount of loan you’ll need with gifts from family members will help to lower the interest rate. 11. Cash-out – if you refinance and want to walk away from closing with money in your pocket, you may be increasing the percentage of loan to property value.

We hope this information is useful to you! If you have other burning questions you'd like us to answer, post a comment here or send us an email at info@mafc.com.