Tips for Making a Westchester Home Purchase
If you're looking into buying Westchester, NY real estate, then chances are that you will need to obtain financing to make your home purchase. Whether this is your first home purchase, or you are an experienced home buyer, it is a good idea that you have a firm understanding of the factors that go into qualifying for a mortgage loan and determining how much you can actually afford to borrow. While each borrower is evaluated on an individual basis, there are some common factors that will raise or lower your Westchester mortgage rate, including the following:
· Credit Score: The interest rate you are offered by a lender when you purchase your Westchester, NY real estate will depend, to a great degree, on your credit score. For conventional financing, you will likely need a score that is at least 650; however, if you are looking for a low Westchester mortgage rate then your score needs to be at 750 or higher. If you qualify for any of the government backed financing, you may be able to obtain comparable interest rates with a slightly lower credit score.
· Debt to Income Ratio: Lenders also look at two ratios to determine whether or not you qualify for financing and what Westchester mortgage rate to offer you. First, as a general rule, the total amount you will spend each month on your mortgage payment, taxes, and insurance should not exceed 25-28 percent of your gross monthly income. Second, all of your fixed debt, including things like your mortgage, car payment, student loans, etc. should not exceed 36 percent of your gross monthly income.
· Employment History: Lenders like to see a lengthy history of employment within the same field as a rule. A change in career, a spotty employment record, or self-employment are all red flags to lenders; however, this does not necessarily mean that you cannot qualify, just that you may need to supply additional documentation showing your credit-worthiness.
· Down Payment: The more money you have for a down payment, the lower your monthly mortgage payment will be; however, a large down payment may not be necessary. Government backed loans, such as an FHA loan, can require as little as 3.5 percent down. Many states even offer programs to help with the down payment. You will, however, probably be required to document where your down payment money came from when you apply for a loan.
· Type of Mortgage: Aside from your credit score, probably the biggest factor in determining your Westchester mortgage rate is what type of mortgage loan you take out. The two basic options are a fixed rate mortgage or an adjustable rate mortgage. A fixed rate loan offers a monthly payment that remains the same throughout the life of the loan which is usually for 30 years, although 15 year fixed rate mortgages are gaining in popularity. As of January, 2013, rates for a fixed rate 30 year loan in Westchester, NY start at about 3.42 percent. An adjustable rate mortgage, or ARM, contemplates an initial period wherein the interest rate remains the same, but then is subject to change over the remaining life of the loan. Rates for an ARM start at about 2.8 percent.
Be sure to consult with your real estate agent about current mortgage rates and other issues that may affect how much home you can afford to purchase.