There are a variety of factors that can impact an individuals ability to qualify for the best mortgage rates, and if you’re not aware of them before you begin the process of searching for a mortgage, it can be disappointing, to say the least.
To help you understand more about mortgage rates, and what your chance of getting a favorable one might be, we’ve highlighted 10 of the most common factors that typically affect rates:
- Consumer debt
If you’ve got high debt payments, whether it be auto or a credit card for example, you can expect this to significantly impact your mortgage rate.
- Price hikes
With home prices rising rapidly in recent months, it can be hard to predict the market and quite how it will affect your mortgage rate.
- A lack of guaranteed hours or an irregular income
Lenders are far more comfortable with those who have regular, full-time work and a consistent income, and so if you don’t have either of these, you may struggle to get the best rate.
- Being self-employed
Write-offs and the different way their taxes are filed, make self-employed people have a reduced amount of income that can be used on a mortgage application, leading to a poorer rate than an employed person might expect to receive.
- Being divorced
If you’re divorced and paying alimony or child support payments, this will naturally decrease your borrowing capacity – provided you’re making them, that is.
- Inconsistencies in government income
If your file is dependent on government-subsidized income sources, such as child tax benefit, your borrowing power will be reduced as lenders won’t want that benefit to represent too much of your income.
- Having no active credit
It’s important that you re-establish your credit profile before applying for a mortgage if you’ve had a previous consumer proposal or bankruptcy, so that you can prove to the lender, you can be trusted to make the loan repayments.
- Using your credit lines too much
If you regularly max out your credit card, or build up large balances over several cards, your credit score might take a tumble, even if you pay them off on time, and this will have a direct impact on the mortgage rate available to you.
- Active debts
You should always try to pay off any active debts before applying for a mortgage, otherwise your credit may be negatively affected.
- Issues with your credit profile
Lenders take a lot of time to scrutinize credit profiles, and any inconsistencies could spell bad news for your mortgage rate, just as identity fraud can, too; check your credit profile regularly to spot any unfamiliar activity.
How can it help to seek guidance from a mortgage broker?
Mortgage brokers generally have the tools and specialist knowledge at their fingertips to help homebuyers navigate the mortgage application process, understand more about the rate they can expect to receive, and the steps they can take to improve it.
Talk to a local mortgage broker today and start taking the necessary steps to get on track for the very best mortgage rates.
