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Column: Will you get a loan? It depends

Steven J. Raj

Will interest rates go up or down? Is now the right time to lock in a mortgage rate or refinance? How do I qualify for the best rate and what loan pro-grams are best for me?

All are great questions in the world of mortgages and consumer lending. All are questions that are best answered with “It depends.”

But the answer that applies to anyone thinking about loans and interest rates is preparation. As a mortgage lender, it’s the universal truth for anyone considering buying or refinancing a home.

Lots of variables swirl in the world of home mortgage loans. But no advice is more rock-solid than to do your research and to be prepared. By the same token, one of the biggest mistakes people make, usually leading to lots of trouble, is borrowing without being sufficiently educated about their loan opportunities and understanding the terms.

Interest rates have been at historically low levels and remain bargains when compared with rates over previous decades. With rates so low, conventional wisdom goes they probably are headed up in coming months.

In reality, it’s anybody’s guess. So instead of forecasting where rates are headed, the best advice is this: Do your homework and ask a lot of questions. If you are considering making a home or car purchase in the next year, or refinancing the mortgage or car loan you have now, you’ll want to talk to your lender and go through the process of seeing where you stand, what’s available and what you need to know about your finances, and how they are judged by us.

Just because your neighbor or coworker did or didn’t qualify for a certain rate or loan product doesn’t mean the same experience will apply to you. Lenders look at four main factors in evaluating you for a loan and we all look at least slightly different in that analysis. Those factors are:

Your credit score

Your income and length of employment

Your reserve resources, such as savings accounts, which represent funds available for your down payment and closing costs

The home you want to buy

Only by reviewing your situation with a lender can you get an accurate assessment of where you stand and where you may need to go. For example, a good lender will not only tell you how to work to improve your credit score but also will discuss what you don’t want to do in coming months before applying for loan — actions that might reduce your credit score.

I have worked with many loan applicants who, by understanding their situations and working on their credit scores, have been able to qualify for better interest rates when they borrowed. They saved significant money over the term of their loans through lower rates. And it didn’t cost them anything to wait a bit and take a few actions to raise their credit scores.

That’s what I mean by being prepared. If applying for a loan looks like a part of your future, the best thing you can do is to start the pre-work now. You don’t want to be in a situation in which you feel rushed to close your loan. You want to come in prepared.

There is a myth that financial institutions don’t have money to lend, or have become so careful that they can’t lend. While new rules that took effect after the financial crisis certainly have changed the landscape, many lenders have cash available and want to lend now. We want to work with you, too, to make the process easier and more sound — for you and for us.

Where are rates headed? Is now the right time to borrow? What loan program is the best for me?

It depends. But a conversation with a lender will help you learn about how you match up with the marketplace. Being prepared is the best advice for ensuring a good lending outcome.

Steven J. Raj is vice president of Mortgage and Consumer Lending at Park State Bank in Duluth. You can reach him at or (218) 727-8001.