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This year is one of the best to invest in property because at the same time that home prices around the US are at a record low, interest rates on mortgage loans are also low. So it’s a relatively good time for most people to consider a home loan in Boston, but understand that mortgage loans with the best interest rates – i.e. the absolute lowest interest rate loans – are reserved for people who are strong in all of the following three areas:
Three Major Criteria for a Low Mortgage Loan Rate in Boston
- Credit Score: Your credit score matters a lot. A high score will show the lender that you are a reliable candidate for their money. The higher your credit score the better, since it correlates to a lower chance of defaulting on the monthly payments. So make sure that you are strong in this area. Lenders can help evaluate your credit. Whatever you do, though, don’t do anything sudden or rash with your credit, and avoid credit repair agencies without talking to your loan advisor. Often enough, they can make things worse.
- Income: After your credit rating, the monthly income of your family is the second criteria looked at. In Greater Boston (as in every other area) the price of a house will change based on location and the market. When applying for a loan for a house or condo, make sure you can afford to pay back the lender. Lenders check your Federal tax returns to ensure that your total debt is not more than 45% of your salary – in other words, the total cost for things such as payment of bills and housing for a month should not be more than 45% of your income (this measure has been enforced particularly since the housing bubble burst; since many loans were accepted based on the “Stated Income” of an applicant). Make sure you have sufficient income for a house in a posh area like Beacon Hill.
- Collateral: While a few years back, getting a mortgage loan with a zero down payment was very easy, today it is more challenging. These days, lenders expect a minimum down payment or collateral since it shows them that you are serious about buying a house, which then increases their confidence in you. It is still possible to get zero-down under certain circumstances, but a good downpayment will get you better rates, generally.
Today you need to be strong in all three of the above major criteria to get a mortgage loan at a low interest rate (a high score in all three criteria shows the lender that chances of you defaulting on payment are low and that they will get their money back; hence the lower rate). But even if you are not strong in all the above areas no need to worry, your application for a mortgage loan will usually be accepted, but your interest rate will change accordingly – in that sense, the interest rate percentage is partly a measure of lender risk relative to your contribution and past history.