Mortgage interest rates are the lowest in 50 years. But not everyone can get that 2.9% advertised rate.
Take this yes/no quiz to see if you qualify for the best interest rate on your home loan.
1) Is your true mortgage credit score over 740? (Credit Karma is not your true mortgage score.)
2) Is the property your primary residence? (A loan for a rental property is a higher risk to the lender, so the rate is higher.)
3) Do you have 30 percent or more equity? (Loan-to-value ratio is a major factor in the interest rate. However, there are loan programs that include monthly mortgage insurance that come with the lowest rate. Your loan officer can advise you further.)
4) Is your home a detached single family residence? (A condo, townhouse, co-op, or multi-unit property may have a higher interest rate, depending on equity. A condo with significant equity can still get the lowest rate.
5) Do you need a jumbo loan? (Jumbo loans are classified as high risk, especially now during the economic downturn due to the coronavirus. A jumbo loan carries a higher interest rate to offset the risk to the lender.)
Even if your loan doesn’t qualify for the lowest rate, it might still be worth refinancing.
As a general rule, you need to lower your rate by at least .5% to consider refinancing. In some cases, such as a small loan, your rate reduction needs to be more in order to make sense.
Loans are very much individualized to a person’s specific situation. The purpose of this post is to make people aware that the lowest advertised rate might not apply.
Additionally, interest rate is not the only factor. Lender fees and a possible buy-down fee are items you want to ask your mortgage broker about.