Every first home buyer looking to buy a home with the help of a mortgage should ensure that they meet the criteria for the mortgage. Lenders will not consider you unless they feel confident that one is a low-risk borrower and can pay back the loan even when the rates rise. One should qualify for a higher rate, that is, the qualification rate, to prove this.
Implications of the qualification rate
The qualification rate assures the lenders that one’s debt ratios are low and the borrower will not default payment when the rates rise in the future. The rates apply for a variable or a fixed mortgage rate of fewer than five years. Also, the qualification rate tends to be higher than the actual rates offered by lenders.
More importantly, the qualification rates will not affect monthly payments. On behalf of the lender, the loan officer will issue the borrower with the contract rate, which will be used to determine the monthly payments dollar figure. Qualification rates merely get one to be eligible for the mortgage. Borrowers who do not reach the qualification rate can still get amazing deals with other alternative or non-traditional lenders who may have lower qualification rates through their loan brokers.