While the credit score often gets the most attention in how to get the best interest rate on a 15 year mortgage, there are at least three other factors that also play a substantial role. Understanding how to maximize these factors can help to save considerably on the quoted interest rate.
Employment Factors
Traditional lenders have always been less willing to lend to those that are self-employed or those that have a limited employment record. Most lenders will need to see at least 2 years of steady, continuous employment for any home buyer.
Individuals that are self-employed face more rigorous standards. They will need to provide full documentation of their income, which means taking the time to ensure all of the financial records for the past few years are complete and in order.
Debt-to-Income Ratio
A very big factor that all lenders consider for the interest rate on a 15 year mortgage is the debt-to-income ratio for the home buyer. This is the amount of money paid out in existing financial commitments compared to the amount of money that is earned. This includes more than just the home payment; it can include all debts including credit cards, vehicle loans and other types of debt. Lower ratios, typically at less than 28% for all debts against income will earn the best rates.
Boost the Down Payment
It is possible to buy a home with very limited down payment or, in the case of VA loans, with no down payment at all. Typically, with conventional types of loans, lenders offer the best interest rate on a 15 year mortgage if the buyer is able to put down at least 20% of the purchase price.
Saving a bit more to be able to meet that high level of initial down payment may delay buying a new home, but it can result in significant benefits in the mortgage rates and the long-term cost of the loan.To learn more about the factors that influence the interest rate on a 15 year mortgage, talk to the lending experts at Guaranteed Rate.
