What will the interest rate on my mortgage be?
This is consistently one of the very first questions I'm asked by home buyers, followed by what will my payment be on a home costing "XYZ." And my answer is usually "I don't know what your rate or payment will be, as there are multiple factors that go into determining what the final rate will be for a specific borrower. And while I've known for a long time that there are multiple factors in the equation, what I didn't realize until recently is that there are actually some 26 criteria that can affect an individual's mortgage rate. These include:
- Loan amount
- Loan to value ratio (LTV)
- Combined loan to value ratio (CLTV)
- Credit score
- Credit history
- Escrow preference
- Closing date
- Loan type
- Property type
- Occupancy type
- Available assets
- Asset seasoning
- Debt ratio
- Housing ratio
- Home improvements needed
- Employment type
- Employment history
- Documentation type
- Term of loan
- Seller contributions
Obviously, not all of these impact each borrower all of the time. BUT it's really critical for home buyers/borrowers to make sure their lender really understands their unique financial situation and needs. Otherwise, you'll be quoted rates that might never see the light of day once you actually make a loan application. Be sure your lender is asking you the right questions so you can ensure that the rate quote you get is as close to reality as possible. Don't ever rely on a quote over the phone or the internet. The Home Loan Learning Center is a great resource to start getting educated about how all this works.
And if you are thinking about starting to look for a home, don't wait to get pre-qualified. Start putting your documentation together now. Not only will this speed up the loan-pre-approval process, but it will allow you to make a much stronger offer to a seller (very important these days in cities like Charlotte where we are now officially out of a buyer's market). Here's a list of just some of the documents you should start gathering putting in your "morgage file:"
- A list of previous addresses for the past two years, and if you were renting, the name(s), address(es), and phone number(s) of your landlord(s).
- W-2 forms for the last two years. If you are self-employed or your income is based on commission, you will need your tax returns for the last two years complete with schedules and a year-to-date profit and loss statement.
- Paycheck stub for the last 30 days.
- Account number(s), balance(s) and monthly payment(s) for all outstanding creditors (including credit cards, car loans, student loans, etc.).
- Bank statements for the last two months, and their most recent asset account statements (i.e., stocks, 401K, etc)
And don't forget to at least annually check your credit scores--you can do this for free. I've had any number of buyer clients in recent months who hadn't checked their scores in years and found out that their scores were way lower than they thought (which increased their borrowing rate) because of incorrect items on their credit histories. And even if you challenge incorrect information it can take 30 or more days to resolve and get your score back to where it needs to be.
Carolinas Realty Partners would be happy to put you in touch with some of Charlotte's top mortgage lenders if you are looking to finance a home or just get an idea of what you could qualify for before you start your home search. Getting prepared in advance will ensure a smooth transaction with a minimum of surprises. And I won't need to be saying "I don't know" when you ask what will the interest rate on my mortgage be!
Carolinas Realty Partners will be happy to help you get started in getting pre-approved for a mortgage. We have great relationships with some of Charlotte's top mortgage lenders. Let us help you... and then I won't need to say "I don't know" when you ask me what will my mortgage interest rate be and how much will my monthly payment be!