Loan rates depend on many factors outside of market rates. Your credit score, the property's value, and company policies all affect what you will pay for your mortgage. With so many variables, you can get a better loan rate with some careful research.
Revaluate Your Credit Profile
There are many factors that influence your credit score besides payment history. Income, assets, and debt to income ratio are important to lenders. So even with a recent foreclosure, a high level of cash assets could qualify you for a decent rate.
Lending companies don't automatically use the FICO score to rank your loan application. The financing company may use there own standards or allow loan officers to make decisions. This is where a letter in your credit report explaining extenuating circumstances, such as a job loss or illness, can help. Just be prepared to verify the information if the lender asks.
Take A Close Look At Your Property
Your property's value can also affect your rates. A property in an area with a proven history of increasing home values is easier to qualify for low rates.
Conventional loans, those sponsored by government entities such as Fannie Mae, have lower rates with their loan caps. Larger loans, also known as jumbo loans, will have higher rates.
Improve Your Down Payment
A large down payment can also improve your rates. 20% is a good starting figure, but more is better. Right after a bankruptcy, you may have to put up as much as 50% to secure a loan.
Select Adjustable Rates
Adjustable rate mortgages also offer low rates, at least initially. Usually you will have one to seven years with a low fixed rate. This low payment will help you to qualify to borrow more.
However, after your initial period, mortgage rates will rise and fall based on a specified market index. Caps will offer you some protection from drastic increases in payments. You may also have the option to refinance to lock in low rates.
Take the time to read about rates and terms. Ask for lots of quotes and play with changes in terms to improve your rates.