How To Get A Low Interest Home Loan

How to Get a Low Interest Home Loan

by

Jerry L. Work

With interest rates lower than they have been in 20 years, this seems like the ideal time to borrow money for a home. It is now possible to pay less than 5% interest on a home loan. It only take a couple of percentage points on a loan to make a large difference in the amount of your monthly payment. The bad part of this is that you probably can’t get one of these low interest loans.

As bank losses from bad loans have mounted, they have become much more strict about to whom they grant credit. Banks have been stung so badly on loans made to questionable borrowers over the last few years that they have now completely changed course and don’t really want to lend money to anyone (and why would they, with the government giving them money for nothing?). So the situation we have today is lots of people badly needing to borrow or refinance a home loan, super low interest rates, but a banking system reluctant to do business with anyone. So how can you actually borrow money for a home loan in these conditions? The first key is your credit rating. Credit ratings are plummeting as home owners all over the country struggle to keep up with their mortgages. But if you want a low interest loan, you have got to maintain a good credit score. Improving your credit rating will do you a lot of good. You are probably also going to need some cash for a decent down payment. The years of banks making tons of home loans for little or nothing down are gone. Cash is required to get the good loan rates. One alternative is if your existing mortgage is government-backed, which may qualify you for a new loan under the new initiatives spearheaded by President Obama. Another way to get a new low interest home loan is if you are a veteran of the military. Thanks to the Veterans Administration, veterans can now get loans that are guaranteed by the government. Another advantage of this kind of loan to a veteran is that, since it is guaranteed, mortgage insurance is not necessary. Finally, if you want to try and take advantage of low interest rates, avoid jumbo loans, which are typically loans in excess of $417 thousand. Right now, you can expect to pay about one and one-half percent more for a jumbo loan. So, it is possible to get a low interest mortgage, thus taking advantage of the lowest interest rates the U.S. has seen in decades. But it’s not that easy. Make sure your credit is clean, you have sufficient funds for a down payment, and borrow less than $400 thousand. Being in the military also gives you a huge advantage, though I do not really recommend joining the military specifically for getting a better rate on a loan.

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