The 4 Percent Mortgage Rate: Myth Or Reality?

Today’s mortgage rates are breaking records just about everywhere you look. Understandably, this has homeowners scrambling to lock them in before the bubble bursts. But some experts are saying that while it is possible to get a mortgage rate as low as 4 percent, it isn’t cut and dried. Still others are warning that getting locked in at such a rate is next to impossible.

Playing Hoops
For the side saying that low rates are possible, they say that rates as low as 4% can only be had by jumping through hoops. For example, a couple who consists of a freelancer and their spouse with a part time job may finally get the rate they’re after, but not before exercising a lot of patience.

One of the main factors that influences the ability to get a low mortgage rate is having a job that both provides steady income, income that’s easy to document. With today’s economy being what it is, there are many not able to do so.

It may mean that low rates are possible, but that would-be refinancers will have to wait a few years until their incomes stabilize before being able to get them.

The Score
As always, credit score is a biggie where it comes to qualifying for low rates. But many homeowners aren’t sure what looks good to Freddie Mac or Fannie Mae. The truth is that if you can either make a large down payment, or will have a lot of money remaining in your bank account once your down payment has been made, this is very likely to increase your chances of being able to qualify for low rates.

A score of 740 or better is usually needed in able to get the lowest rate possible. As well, you will need to be able to make a down payment of 25 percent or more on a single family dwelling in order to qualify.

Document, Document, Document
Believe it or not, it’s the documentation of homeowners which has lenders running scared. These days, everything has to be documented by the homeowner, including income, and down to the last penny in many instances.

More documentation means a higher level of scrutiny by the lender. This presents a much higher risk of the lender having to repurchase a home loan if some income is missed on the application.

The Right Match
Another major factor in being able to get the lowest interest rate is to find the right lender. And this can only be done by knowing which questions to ask. There are a few questions every homeowner should ask several lenders before committing to one. Among them are whether or not they have references from area homeowners, the amount of experience they have, what rating their company has, and whether or not they communicate with the underwriter. The better the answers to these questions, the higher the likelihood of being able to get a rate that’s closer to the lowest.

Decreasing Liabilities
How much of a risk you pose to a lender can also greatly affect the mortgage rate you end up getting. But this means more than debt. While debt is a big part of liability in the eyes of the lender, your employment, or lack thereof, can pose just as high a risk.

Some solutions to the employment question may be taking on a second job if current employment is part-time, freelance or of some other unpredictable nature.  If you do have debt in addition to unsteady income, multitasking and improving your income as you lower your debt may make you more favourable in the lender’s eyes.

Required Documentation
Having particular types of documentation on hand may not qualify you for a lower rate, but can ensure that the process goes as smoothly as possible. You should have at least two forms of legal identification, pay stubs for the last two months, in addition to any stubs for bonuses you received over the last twelve months, and two years of tax documentation in addition to bank statements for the last two months.

Guest author Tony Caro writes on a variety of topics, but is particularly well-versed on the mortgage industry.  He is a frequent contributor at, a site that offers advice to consumers seeking a refinance.

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