Mortgages: When a Good Interest Rate Doesn't Matter

Mortgages: When a Good Interest Rate Doesn't Matter

by Ed Metro, Braintree Cooperative Bank Senior Loan Originator NMLS #33373

Most people shopping for a mortgage tend to be focused on one goal: The lowest possible interest rate. Many have already noticed that rates have crept up in recent weeks as a result of a busier stock market. The thought is that more consumers who were observing the market movement are seeing rates rise and are now motivated to take action.

The markets, along with the unemployment rate and the Federal Reserve are still supporting low rates, so the focus has shifted to interest rates as the reason for taking out a home mortgage. While rates are low, the ability to qualify for a mortgage becomes an entirely different story. Even the most-savvy consumers aren’t exempt from underwriting scrutiny.

Focus on qualifying

Most people should be more interested in the ability to get financing rather than what their interest rate and payment is going to be.

The ideal credit profile that most lenders look for includes the following:

• A stable W-2 job or business for the past 2 years

• Consistent income to make all your monthly payments

• Same residence history for the past 2 years

• A middle credit score of 700 or better

• Customer has full access to funds needed

• Low or no monthly liability payments

If you don’t meet one or more of these requirements, don’t worry, but more proof may be required to determine your ability to qualify. If your credit profile matches the ideal credit profile above, then by all means start comparing mortgage offers by rate and cost.

Signs you’re having trouble qualifying for a loan

The most telling sign of a credit challenge is when the mortgage lender continually asks for updated financial documentation or when financial documentation you supplied causes more questions. Best example — the lender asks you for updated bank statements to verify cash to close, you give the bank an updated statement thinking you’re doing exactly what the lender asked you to do, only to now have to explain the large deposits going into your account.

Another common sign you’re having problems with qualifying is that the lender is taking longer than usual to close the loan.

Because of underwriting guidelines, the ability to get financing may be harder for the foreseeable future. So the customer shopping for a loan today while doing their homework in comparing mortgage quotes should get qualified with a lender first, then focus on the rate, payment and costs.

Ed Metro can be reached at Braintree Cooperative Bank by calling 781-843-1370 ext. 231 or by email at emetro@braintreecooperative.com

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