How to Get the Lowest Refi Rates in 2009
© 2009, Brandon Cornett. All rights reserved.
Saving money is the number-one reason people refinance their homes. But in order to achieve this, you have to get the lowest refi rate possible. In fact, if you don’t lower your interest rate enough, there’s really no point in refinancing your mortgage. You have to save more money over the life of the new loan than the amount paid during closing. And this is why the rate is so important.
Many homeowners think they will automatically qualify for the lowest refi rates a lender has to offer. But this is not true. If you think back to when you first purchased the home, you’ll recall that the lender assigned the interest rate based on your credit score and other qualifying factors. The same thing will happen during the refinancing process. So once again, your qualification criteria will determine if you qualify for the lowest rates the lender has. You don’t get them automatically.
The next time you visit a lender’s website, or see a commercial on television, pay attention to how they advertise their rates. When they claim to have refi rates as low as 5% (or whatever), I can guarantee it will be followed by a disclaimer. That disclaimer will say something to the effect of: “These rates are for well qualified borrowers. Terms and rates will vary, based on qualification criteria … etc.” And the lender can define those criteria however they want.
In order to get the lowest refi rates, most lenders will require a certain credit score, a certain amount of equity, and a certain debt-to-income (DTI) ratio. How you measure up in these areas will determine whether or not you qualify for the best rates.
To Get the Lowest Rates …
Differently lenders have different standards. So it’s impossible to say what a “well qualified” borrower is across the board. But with that being said, many lenders have similar standards for refinancing. That’s what I’ve listed below. In order to get the lowest refi rates a mortgage lender has to offer, you will probably need the following:
- A credit score of 760 or above.
- At least 20% equity in your home.
- A favorable debt-to-income ratio, ideally below 30%.
Again, this will vary from one lender to the next. But these are the numbers most often reported within the mortgage industry. If you have all of these things going for you, there’s a good chance you’ll qualify for the best rates the lender can offer. And that’s the key to success with mortgage refi loans!
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