3 Steps to Improve Your Mortgage Rate (Step 3)
The last step in the 3 steps to improve our mortgage rate is to improve your loan-to-value ratio. A prospective borrowers loan-to-value ratio is figured by dividing the amount you want to borrow by the price of the home you wish to buy. For instance, if you want to buy a $200,000 dollar home and you want a mortgage of $180,000 dollars, your LTV would be 90%.
Most lenders prefer an LTV over 80%. If your LTV is under 80%, a lender will likely insist that you purchase private mortgage insurance for the loan. In order to improve an LTV ratio, a borrower can either increase their down payment or choose a less expensive home to purchase. Unfortunately, a large down payment is like a colon cleanse for your savings, but it will definitely be beneficial in the long-run.
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