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Who Qualifies For The Lowest Mortgage Interest Rates?

By Ann White

One of the most overlooked aspects of buying a home is getting a mortgage.  The difference between a good mortgage and a bad mortgage could save you thousands of dollars over the course of the loan.  One of the most important aspects of the mortgage loan is the interest rate.  There are several characteristics of people who qualify for the lowest mortgage interest rates.

Good Credit Score

The first characteristic of people who qualify for the lowest mortgage interest rates is that they have good credit scores.  A credit score is an indicator of the likelihood that a person will repay a loan on time.  A good credit score comes with years of making debt obligations on time.  Because of this, people with good credit are considered less risky and often receive the best credit scores.

High Down Payment

The second characteristic of people who qualify for the lowest mortgage interest rates is that they put down larger down payments.  To qualify for a mortgage, most banks will require a borrower to put down at least a 10% down payment.  This helps the bank recoup their investment in the event the borrower defaults on their loan.  Those with down payments in excess of 20% will provide the bank with even more security, and will receive an even lower rate.

Pay Points

The third characteristic of people who qualify for the lowest mortgage interest rates is that they pay mortgage points.  Mortgage points are fees that are paid at loan origination.  The fees are then used to pay down the mortgage interest rate.  Each point costs about 1% of the mortgage balance borrowed, but will pay down the mortgage interest rate by about 0.125%.

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