Extremely Low Mortgage Interest Rates – What Does it Mean for You?
Mortgage interest rates go up and down weekly, if not daily, but one thing is for sure during the COVID-19 pandemic, low interest rates are available.
What does this mean for you?
It puts homebuyers in a great spot. There’s no better time than now to take advantage of the low rates. You won’t find yourself in a situation like current homeowners with higher rates are in – needing to refinance. You’ll already have the lowest rates around.
How Homebuyers Benefit from Low Interest Rates
Homebuyers today benefit tremendously from low interest rates because it boosts their buying power. What they may not have been able to qualify for 6 months ago, they can qualify for now, simply because of the lower monthly payment.
Your debt-to-income ratio determines how much loan you may borrow. Potential homebuyers above the DTI give up their dreams and keep renting, but with lower interest rates, those dreams may come true.
Low interest rates mean a lower mortgage payment. For many buyers it’s enough to bring their debt-to-income ratio down low enough that they qualify. For others, it’s the payment they’ve been waiting for, even if they already qualified with the debt-to-income ratio.
On top of the lower payments, buyers pay thousands of dollars in less interest with the low interest rates. Let’s take a $100,000 mortgage for example. If you have the choice between a 4.5% rate and a 3.5% rate on a 30-year term, you’d save as much as $20,750 over the life of the loan in interest.
It’s safe to say the low mortgage rates help homebuyers in ways that nothing else would help. It could mean the difference between buying a home and still renting.
Homebuyers don’t automatically get the low interest rates available today. You must prove you qualify for it. If you want to increase your chances of getting low mortgage rates, do the following:
Increase your credit score – Aim for at least a 700 credit score or as close as you can get
Make a sizeable down payment – 20 percent is great, but anything more than the minimum down payment requirement helps
Keep your employment and income steady – Lenders prefer a 2-year stable history, but any consistency in both employment and income help
Keep your debts down – Lenders look at your debt-to-income ratio (comparison of your monthly debts to your gross monthly income), so keep your debts as low as you can
Low interest rates mean paying less interest over the life of the mortgage and possibly owning your home faster or improving your financial situation. If you’re in the market for a new home or have even been thinking about it, now is the time. We haven’t seen low mortgage rates like these for many years and no one knows when we’ll see them again. Take advantage of the lower rates and make the most of buying a home today.
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(disclaimer we are not a mortgage company. we offer services in finding, locating, negotiating and coordinating a home purchase)