How to lower the interest rates on your mortgage
July 19, 2018 | Tom Ashworth
Lenders like any other businessmen have a profit motive, that is where mortgage comes in. The lenders identify the cost of acquiring the funds, operation costs of services and the profit margin. There are variable pricing of mortgage for borrowers with different credit worthiness.
A loan with 20% down payment is a lot safer than a loan with 3.5% down payment. If the lender has to seize the property to recover the loan amount then the margin is larger between what is owed and what the property is worth on an 80% mortgage.
Credit scoring allows lenders to be competitive and to get the best loans from various borrower groups. Under this risk based pricing method individual lenders set their own levels for what they deem to be “A” which is given to the best rates. Scores from 710 to 740 are considered good credit and below that is considered high risk and therefore higher rates.
Both the borrower and the collateral property must be properly assessed for any risk before a loan is given. The credit history of the borrower along with income stability must be carefully scrutinized by the lender; however if the lender still defaults on loan payment then the collateral property must cover the loan so as to avoid loss to the lender.
Buyers are often oblivious about their credit score and the affect they have on their interest rates. The buyer can benefit a lot by getting the approval from a reputable lender before looking for a home. The approval of lenders can improve the credit score of the borrowers which will help them get lower rates on loans.
If you are interested in Real Estate in the Texas Hill Country, please feel free to contact Tom Ashworth (Smart Path Realtor) at (208)830-7992.