Low Mortgage Rates – High Credit Scores

Low mortgage rates translate to affordable monthly payments in the short term and substantial savings over the life of a loan. As well, low rates make home owners consider refinancing. The cost of the refinance does not seem so bad with savings in the picture.

Drop In Rates

During the past week, the rate on the 30-year fixed mortgage, the most widely-held type, fell from 4.38% to 4.28%. Within the past few days, 15-year fixed mortgage rates dropped from 3.87% to 3.85%. With similar decreases in adjustable rate mortgages (ARMS), it looks like the low mortgage rates might take some of the sting out of the economy in this post-Federal Home Buyers' Tax Credit period. The only catch is that lending guidelines are tighter than ever before and not everyone will qualify for a low rate.

High Credit Score

When it comes to credit and mortgages, the person with the highest credit score (usually 740 and higher) gets the lowest rate. Although a high credit score is not the only requirement to be eligible for a low mortgage rate, it can make a big difference. Borrowers must aim for the more favorable rate because it can make a noticeable impact on monthly payments.

A person with a 760-850 credit score could end up with a monthly payment in the range of $1500; an individual with a 620-639 score might have to pay over $1700 per month. High credit scores can mean huge savings. It is advisable for a borrower to have the best possible credit rating before he approaches a lender.

Debt-to-Income Ratio

As well as that high credit score, borrowers must have a certain debt-to-income ratio. Usually lenders insist that a borrower's overall debt does not exceed 45% of their income. Actually, debt-to-income ratio is given huge consideration in getting low mortgage rates. Even if a person's credit score is less than perfect, a sizeable income (or assets) can turn the tables in their favor.

Few Takers

Despite the low mortgage rates, you need not expect to see every ' home for sale' sign taken down in the next few weeks. Some people are taking advantage of the low mortgage rates but not everyone is taking the plunge. On the surface, low mortgages look like a deal that nobody could (or even should) resist but people worried about unemployment are not in a buying mood.

High Standards

In addition, lenders have those strict guidelines in place. The rules are not written to welcome the person with the low credit score. Of course, it does not follow that an individual with bad credit can never buy a home.

Credit Restoration

Credit repair is always an option and a restored rating can eventually open the doors to a new home. The repair process takes effort and commitment but credit restoration is worth the effort. With a good credit score, you won't miss out on opportunities such as the current low mortgage rates.

Are You Planning To Take Advantage Of The Low Mortgage Rates?