Planning on buying a home? You may be paying towards a mortgage for many years so it’s wise to shop around for the best deal on a mortgage. Buying a home for most people is one of the biggest purchases in their lives. Finding the best deal on a mortgage can save you thousands of dollars in interest. Here are some tips on how to go about it:
Get Your Credit Score in Shape
Some people might not think their credit score is very important, but your credit score has a lot to do with determining the kind of loan you are able get. The higher your credit score, the more leverage you have. A higher credit score can save you from having to deal with less desirable and more expensive lenders. If you have a good credit score, you are not as big of a risk so your chances of getting approved are higher and you can get a better deal from a better lender.
Meet with Different Lenders
You have your credit report and you know your credit score. It is time to seek out a mortgage broker or lender. Touch base with many lenders and weigh your options. Compare and contrast the lenders’ styles and offers as you shop for mortgage. How helpful are the lenders? Also pay close attention to their level of knowledge about the real estate market. It is also time to find out what documents are required from you when applying for the mortgage.
Mortgage First Then the House
First things first. Get preapproved for a mortgage first and then go shopping for a home. People sometimes make the mistake of starting with home shopping or doing it concurrently while getting approved for a mortgage. This might put you in a corner financially. You may get preapproved for a mortgage only to find out that the house you picked out is a bit out of your price range. Don’t let your emotions hijack the home buying process causing you overpay or stretch yourself beyond your means.
The general rule when applying for mortgage is that it’s good to have a minimum of 20% of the initial purchase price of the home as down payment. This helps you get the best mortgage rates since the mortgage price is adjusted based in the risk factors. To the lender, a loan with 5% down payment is a higher risk as compared to one that has 20% down or more. This means the mortgage with a smaller down payment usually carries a higher interest rate.
Ever heard of PMI? If you have less than 20% of the purchase price as down payment, you generally will have to pay private mortgage insurance.
These were a few tips to help you get the best mortgage rate. A good starting place is to get your credit report early and if it’s not good start improving your credit score. Try to have the 20% down payment ready. Shop around for the best mortgage and compare the prices to get the best deal.