How does the interest rate factor in securing a mortage loan?

Asked by Trulia Denver, Denver, CO Fri Mar 22, 2013

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John Juarez’s answer
John Juarez, Agent, Fremont, CA
Thu Mar 28, 2013
At the interest rate for a given amount and term go up so does the payment. If the borrower’s other expenses remain the same the income needed to qualify for the resulting payment also goes up.

As interest rates rise – which they inevitably will – there will be fewer qualified buyers or buyers will qualify for less.
1 vote
Tony & Karen…, Agent, Denver, CO
Fri Mar 22, 2013
The great news about the currently very low mortgage interest rates is that your payments will be quite low. In fact right now it can be cheaper to buy a home, in terms of your monthly payments, than you could find yourself paying in rent! We have helped three of our own tenants buy their first homes and they all ended up saving money.

Also, there are numerous low-down payment programs available which can reduce your down payment to as little as $500.

That being said, you still need to qualify. Loans are becoming more available, but there might be some strategizing required if you have poor, or little established credit. Everything depends, of course. and it's always a good idea to investigate your financing options first.

Any time you're interested, send us a call, email or text and we can discuss your situation in more detail.

Tony & Karen
0 votes
Robert McGui…, Agent, Denver, CO
Fri Mar 22, 2013
Trulia Denver,

the primary factor is how it determines how much home you can buy. A small uptick in interest rate can mean you qualify for a lot less home. And the reverse is true when the mortgage rates dip even slightly. As far as refinancing, moving from 5% down to 3.5% can mean hundreds of dollars less of a payment depending on the size of your loan.

Robert McGuire ASR
Your Castle Real Estate
Direct - 303-669-1246
1 vote
Denise Olson, Home Buyer, Pewaukee, WI
Fri Sep 27, 2013
Interest rate is only one factor in loan qualification. The higher the rate the less house you qualify to purchase. You need to watch the taxes as well. Another thing that can affect you is your downpayment as it relates to PMI. Last, home insurance also factors into your DTI. So there isn't any one thing you can rely upon to know if you qualify. If you are that close in qualification, you are probably buying too much house. It's best to make sure you are a successful home owner, not just A home owner. Denise Olson
0 votes
Bill Donovan, Agent, Centennial, CO
Fri Mar 22, 2013
The higher the interest rate; the less you qualify for.
Meaning, if you're qualified to look at homes no higher than 250,000 with whatever down payment you're doing; you may now not be able to look at homes more than.245,000, if rates rise.
This is simple version of what everybody else said.
0 votes
Ray, , Denver, CO
Fri Mar 22, 2013
The answer to that question can be broad and ambiguous. In a macro level it comes back to credit scores. In a nutshell Government loans (FHA, VA) don't penalize you based on your credit score, so if you are approved the rate is the same with a 640 or 780 FICO score. As for FNMA (Conventional) mortgages, there are loan level pricing adjustors that FNMA has layered in based on credit risk (FICO score). So the person with a 660 gets a higher rate than the person with a 760 FICO score on a Conventional mortgage. That is very macro and broad stroked, if you need specific information feel free to reach out or visit my website.

Best of Luck
Ray Williams
Denver's Mortgage Maestro
Summit Mortgage Denver
0 votes
Rick Janson, Agent, Denver, CO
Fri Mar 22, 2013
Great question. Your qualification is based on a number of factors, one of which is your debt:equity ratio. Lenders look at your overall gross monthly income and your minimum monthly payments from your credit report. They add to that your mortgage: principal, interest, taxes and insurance (PITI).

With a lower interest rate, your PITI is lower, so your debt:equity looks better and/or you can qualify for a higher mortgage payment.

Does that make sense?

Rick Janson
0 votes
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