Can You Find a Low Interest Rate Mortgage When You Have Only a Small Down Payment?

Should you search for a low interest rate mortgage? Absolutely. Assuming you are able to qualify for a mortgage from more than one lender, there is no reason to take out a loan with a higher interest rate than you can find elsewhere. If you are concerned that you will have to pay a high mortgage interest rate because you only have a small down payment available, it’s important to understand that there are mortgage programs available to people with many different types of financial circumstances. Your down payment is only one piece of the puzzle. Even if your down payment is relatively small, (e.g. lower than a full 20 percent), It may still be possible for you to find a mortgage with a very competitive fixed interest rate.

How Do I Search for a Low Interest Rate Mortgage? If you know that you are looking to buy a home in a certain price range, and that you have a very specific dollar amount available for a down payment, it’s imperative that you know where to look for a mortgage that will suit your needs and also provide you with a reasonable interest rate. Knowing how to search for a mortgage that meets your financial requirements can be a time consuming process. This is exactly why working with an experienced mortgage broker is always recommended. A mortgage broker with extensive knowledge has undoubtedly helped clients with a financial situation similar to yours, and knows how and where to search for a mortgage that will work for you.

Factors That are Taken Into Consideration by a Lender The dollar amount you have available to allocate to a down payment is not the only factor taken into consideration by a lender. While it’s true that the absolutely lowest interest rate mortgages are usually offered to the most qualified applicants, it’s not unreasonable to believe that a borrower with a small down payment will be destined to pay a high fixed mortgage interest rate for the next 30 years. Lenders take all of the following into consideration:

  • Credit score
  • Debt to income ratio (DTI)
  • Employment history
  • Type of loan
  • Value of the home
  • More…As you can see, quite a bit of information is evaluated before a lender can determine the exact interest rate for which you qualify. If the only potentially negative issue is that your down payment is lower than 20 percent, the interest rate you are able to obtain might be similar to a borrower that has a higher down payment. Keep in mind that if your down payment is lower than 20 percent, your lender will insist that you pay Private Mortgage Insurance (PMI), which will add to your monthly requirement. the good news is that once your equity reaches the 20 percent mark, you may be able to eliminate PMI.For more information on how to find a mortgage with the lowest possible interest rate, give The Home Loan Arranger a call today at 1-877-938-7501!
About Jason

Jason M Ruedy is The Home Loan Arranger - Denver mortgage broker and Colorado's top producing loan officer of residential loans, refinance, purchasing, conventional loans, FHA, and VA loans. For home loan information, visit The Home Loan Arranger or connect with Jason Ruedy on LinkedIn .

Speak Your Mind

*