You’re finally starting to gain your footing after a slippery financial recession, and now is a great time to take advantage of interest rates on home loans. However, before you seize the economic opportunity to own your own home, there are a few things you should know about mortgage rates first. Stay ahead of the game with these tips on how to find the best home loan for your financial situation.
1. Clean up your credit. You should begin doing this before you even step foot in a lender’s office. Paying your bills on time is essential to building a good credit score, as well as making sure not to open up any new accounts for credit cards in the months prior to applying for a loan (this could drive your credit score down).
If you haven’t checked your credit report in a while, it is time to do so. Dispute discrepancies on it as soon as possible, since these can impact your overall score. In order to qualify for a great mortgage rate, you should have a score of at least 700.
2. Save up! Everyone knows that saving money is a critical step to home ownership. But did you know that you can actually keep more of it in your pocket by paying more upfront? It sounds counter-intuitive, but home buyers who offer up a bigger down payment are often granted lower interest rates.
Combined with the advantage of paying off your home sooner, this could translate into tens of thousands of dollars saved by the time you make your last mortgage payment. Also, purchasing mortgage points upfront can help you shave years off your mortgage.
3. Shop around. Remember, you shouldn’t be the only one under scrutiny when you go shopping for a mortgage. You will want to have a lender whom you can rely on and trust, so start with your personal bank and then branch out to other reputable institutions. Now is the time to ask about the different financial products that they offer and why each one would be beneficial for you. And as an insider tip, remember to ask about the total cost of each mortgage, not just the monthly payments; the two figures can vary widely depending on which fees you have to pay and how long it will take
you to pay it off.
4. Get pre-approved. Applying for a mortgage to buy a home is a process that depends largely on timing and preparation. You can cut down on the wait and avoid surprises by getting pre-approved; a process that likely will involve you filling out paper work about your current income and debt obligations. Getting pre-approved will give you an idea of how much house you can afford and help you walk into mortgage negotiations with confidence.
5. Look for energy efficient homes. Green mortgages are the next big thing to hit the housing market, but this one isn’t a bubble waiting to burst. By looking for homes that maximise energy use, you can save on your monthly bills. And when you get an energy efficient mortgage, your lender may also increase your buying power by the same amount as you would save on electricity and gas bills, meaning that you could invest that capital into the home of your dreams.
6. Negotiate. Part of finding a good mortgage is creating one. You should certainly look for the mortgage product with the most cost benefits for you, but don’t stop there. Negotiate with the lender and the home seller to get more bang for your buck. For example, ask the seller to put a few thousand dollars towards your purchase of mortgage points instead of expecting him or her to knock ten thousand dollars off the asking price of the house.
7. Stay ahead of the game. Remember that owning a home entails much more responsibility than renting one. If something is broken, from now on it’s your call to get it fixed. Since you won’t have a landlord to rely on anymore, it is a good idea to keep your savings account padded in anticipation of home repairs, which can become quite costly.
Even if you find that you’re not able to qualify for the mortgage that you want right now, the good news is that it will likely only take you a year or two to get back on track. Saving, paying on time, and making smart financial decisions are the only way to get where you want to be, but the sooner you start, the sooner you’ll be able to own a home.