Getting a Good Interest Rate When Financing a House

Steve in Clermont is in the process of paying off his debt. He should be debt free by the end of the year aside from his student loans which are 5% or 6% of his income. He plans to finance building a house. His question to Robert Palmer: Will he be able to get the lowest rates?

There are a couple of things to consider when you are building a house. In most cases you cannot lock the interest rate in until the home is completed. If the build process is 6 to 9 months, you have to hope that interest rates will still be low when the home is finished. The next issue is, only having 5% of debt is helpful, but you have to look at the total percentage of your housing payment. That should be kept around 30 or 35% so that your total outlays are in the low 40s. The magic formula is 20% down, house payment debt to income around 35%, total debt/income at 25% or less and a good credit score.