Your credit score is the most important factor in determining your interest rate.
Make timely payments on all of your mortgage, car loan,
credit cards, student loans, and any other monthly payments you may have. Your
credit card utilization should be below 30%. If it is not currently below 30%,
work toward paying down your credit card debt but do not close any accounts.
You can get a free credit report from www.annualcreditreport.com
2. KNOW AND UNDERSTAND YOUR DTI (DEBT-TO-INCOME RATIO)
Your debt-to-income ratio is the percentage of your gross
monthly income that goes toward paying off your monthly debt obligations.
DTI is a key indicator of your ability to manage your debt
and make payments, and lenders use it to assess your creditworthiness and risk
of default. The lower your DTI, the less risky you look to a lender and your
interest rate will be lower.
To calculate your debt-to-income ratio, divide your total
monthly debt payments by your gross (pre-tax) monthly income.
3. COMPARE LENDERS
When trying to find the best interest rate, shop around.
Do your research and speak with multiple banks or lenders to
make sure you are getting the best fit for your situation.
As you get quotes, although the interest rates are
comparable, different lenders have different fees, closing costs, and mortgage
insurance premiums. Be sure to look at everything, not just the interest rate
they are quoting.
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