7 Tips on How to Get The Best Mortgage
Getting the best rate on your mortgage is a major concern for any home buyer. When you consider that only a few percentage points can cost you thousands over the life of a loan it only makes sense to seek the best mortgage you can get. Buying a home or cottage is already going to cost you a great deal of money. There is no reason to pay more than you have to. Many home buyers do not take the steps necessary to really get the best mortgage they can.
One of the best ways to ensure you will get the best terms and conditions is to prepare ahead of time before getting a mortgage. Being completely comfortable with your finances is one of the keys to being smart financially.
Compare lenders
Depending on where you are financially and how many loans you have taken out before, you may be unaware of just how much the variation in loan rates from lender to lender will affect what you wind up paying. Especially for people who are buying their first home, it can be tempting to just grab any loan you can get your hands on and feel lucky for the money. But this is a bad idea. Even if a home loan only varies by a fraction of a point, you could wind up paying $10,000 or more in additional interest – depending on the amount borrowed and how long you take to pay it back. Ten thousand dollars is enough to make even well-off individuals take a long pause. Take the time to shop around for your loan to avoid paying a lot more money.
Perfect your credit
Most people today understand that their credit score is the single biggest factor in the loan rate they will get from the lender. However, not everyone realizes just how important it is to repair their credit score before taking out a loan. What more people should learn is how to increase their credit score! A few extra points could save you thousands of dollars over the life of your loan. Fixing your credit can take time, but it is time well spent. Get your credit reports, challenge any incorrect information on them and then go through the sometimes lengthy process of cleaning up your debts and collections. You want your credit cards paid down and collections paid off before you attempt to borrow – at least if you want to get the best possible rate.
Be upfront with your lender
If you are in a situation where there are some blemishes in your credit history that cannot be easily repaired, try to be upfront with your lender about them. Better to notify them now about issues then to be caught lying – and possibly lose out on your chances of getting the loan. Honesty has an additional benefit. The loan officer is there to help you get a loan and he or she will often do a lot to see that happen. Letting the lender know now about issues will allow the loan officer to give you advice and work with you to fix any major problems so you can get the loan. If you are buying a home your lender will issue what is called a pre-approval letter. The last thing you want to do is get caught in a position where you have exaggerated your finances. This could cause you to lose out on your potential dream home!
Pay as much down as you can
One thing has not changed about lenders – they still love a big down payment. Before you go to buy a home try to come up with as much money as you can to put down on it. This will make you look good to the lender and will improve your mortgage. The less money you have to borrow – and therefore pay interest on – the less you will pay in interest. And interest can be a killer on a big home loan paid off over a 30-year time period. If you can get to a 20 percent down payment by all means do so!
Fixed rate or adjustable
Whether or not you should go with a fixed or adjustable rate again comes down to timing. If you only plan on being in the home a short period of time and adjustable rates are significantly lower than a fixed rate it could be a good idea to go that route. Only you can decide. Sometimes if there is not that big a spread it might not be worth the gamble especially if rates rise and your plans change.
Limit your mortgage shopping to a two-week period
Your credit score can only weather so many credit inquiries before it begins to drop. If you keep shopping for mortgages beyond the 14-day period it could result in a lowering of your credit score – the last thing you need when you want to get the best possible mortgage. Search hard and compare all your options, but avoid doing so for too long.
Lock your rate when appropriate
One of the things a good mortgage broker or lender can do for you is give you their best guess on where interest rates are headed. If the trend is moving downward it may make sense to hold off on locking your mortgage rate. If that is not the case and rates are trending upward make sure you lock your rate!
