Getting the Lowest California Mortgage Rates - A Guide for Borrowers

Are you interested in getting the lowest California mortgage rates? If so, you are not alone. Whether purchasing a home or refinancing an existing mortgage, the first question most people ask is "What's the rate?"

In order to get the lowest interest rate, it is important for you to understand the factors that affect your interest rate. In general, California mortgage interest rates are based on market factors. The interest rate you receive for your specific mortgage, however, is also based on a number of other factors.

The top factors affecting your California mortgage rate include:

Credit rating. California investors generally offer the lowest mortgage interest rate to people with the highest credit scores. Although the credit score required to get the most favorable rates varies, a good rule of thumb is that the people with credit scores above 739 will be offered the lowest mortgage rates.

Down payment. The higher your down payment, the lower your mortgage interest rate. All other things being equal, someone making a 20% down payment will pay a lower interest rate than someone getting a 95% financed mortgage.

Loan Amount. If you plan to purchase or refinance a home in California, there is a term you need to know - the conforming loan limit. Mortgage loan amounts above the conforming loan limit are called "jumbo mortgage loans." Loan amounts below the conforming loan limit are called "conforming mortgage loans." Conforming mortgage loans generally have lower interest rates than jumbo mortgage loans.

Debt-to-income ratio. Your debt-to-income ratio is calculated by dividing your monthly payments by your gross monthly income. Your cumulative debt-to-income ratio, also referred to as your "back end ratio" compares all of your monthly payments (including your housing payment) to your monthly income. If your gross monthly income is $7,000, and all of your monthly payments add up to $3,000, your back end debt-to-income ratio is 42.8%. In order to improve your chances of getting the lowest mortgage rate, keep your debt-to-income ratio below 43%.

Income and asset documentation. If you verify all of your income and assets by providing paycheck stubs, W2, bank and investment account statements, your California mortgage application is considered fully documented (Full Doc). All other factors being equal, a California mortgage applicant with a fully documented loan will pay a lower mortgage rate than one with a SIVA (stated income, verified assets) loan.

Property occupation status. California is one of the most popular locations for second homes and vacation homes. A mortgage on your primary residence will have a lower mortgage interest rate than one on an investment property or second home.

When searching for the lowest California mortgage rate, keep this in mind. Once we account for market factors, the other factors that determine your mortgage interest rate are based on the investor's perception of risk. Investors reward less risky mortgages with lower interest rates.

Still interested in getting the lowest California mortgage rates? Sign up for our rate alert system. We will automatically notify you you’re your rate reaches your desired level. To sign up for the rate alert system, click here.

Copyright © 2008 Julie Cline

UMAX Mortgage offers mortgages in Ventura County, Los Angeles County, and throughout the state of California. Julie Cline is licensed by the CA Department of Real Estate #01743818.

If you have any questions about California jumbo loans, California jumbo conforming loans, or California FHA jumbo loans, feel free to contact Julie Cline at 866-599-8480 or on the web at http://www.umaxmortgagecalifornia.com.

Please note: this article is not intended as tax, financial or legal advice. Please obtain advice about your specific situation before making financial or legal decisions.