When buying a home, your mortgage is likely your largest financial commitment. Follow these five tips to ensure you get the best rate on your loan.
Mortgage rates vary based on credit scores, down payment size, loan terms and property location. Compare multiple lenders to find the lowest rates and fees.
1. Know What You Want
Becoming approved for a mortgage is the initial step in purchasing your dream home. Although this involves making an important financial commitment, the experience can be extremely rewarding. So before you dive into the buying process, ensure you know exactly what you want – not what others think you should want.
Knowing your criteria is the best way to start shopping for a mortgage. Not only will this help you narrow down your choices, but it will also make the process as seamless as possible.
Before searching for a mortgage, it’s important to take into account your personal budget and financial objectives. After all, no one wants to get stuck with an exorbitant interest rate or make monthly payments that cannot support your lifestyle.
Once you have a clear idea of your ideal mortgage, it’s time to start shopping around for lenders. In order to be successful, obtain rate quotes from three or more lenders and then compare them thoroughly – and quickly.
It’s wise to spend some time learning about the various mortgages available and their workings. Different loan programs may have various features and advantages, such as lower down payment requirements or easier credit score requirements.
The highest mortgage rates may not always be the most economical; however, with careful research and some helpful tips you could potentially save hundreds of dollars annually by finding a better deal. So don’t be afraid to shop around – just remember these five tips when looking for a mortgage:
2. Get Preapproved
Preapproval is one of the best ways to begin your home buying journey. It gives you an accurate idea of how much you can afford and whether your lender will grant a mortgage for that amount. Furthermore, getting preapproved helps prevent you from overspending on a house that doesn’t fit within budget.
Depending on the lender, getting preapproved for a mortgage may involve performing a hard credit check and providing financial documentation. These steps are meant to confirm your identity and income so the lender can confirm if you’re qualified for the loan.
Typically, this process takes 60-90 days; after which you may need to reapply with updated paperwork and a credit pull in order to renew your preapproval. Being preapproved allows for informed decisions and reduces the time spent searching for a home significantly.
Michael Valentini, mortgage advisor at Bank of America, notes that a preapproval letter is proof that your finances have been carefully evaluated and you can afford the home. It also gives sellers peace of mind in knowing their buyer is serious about purchasing their property and won’t back out at the last minute.
You can get preapproved for a mortgage by filling out an online application or speaking with a real-life lender. Either way, lenders will verify your information and provide you with a loan estimate within three business days.
Preapproval can be a stressful and confusing process, but it’s essential to do so early in your mortgage search. Doing so gives you time to address any issues that aren’t resolved during preapproval, giving you an edge over competitors.
3. Do Your Research
When looking for a mortgage, it’s wise to do your research first. Doing this can save time and money in the long run by guaranteeing you receive the most advantageous deal available.
According to Freddie Mac, you should visit at least three lenders and get estimates from their loan officers. Doing this will give you a good understanding of the various offers available and how each lender handles your application.
Zeibert suggests asking your lender for an itemized breakdown of estimated fees before making a final decision. Doing this can help ensure you make an informed choice.
Another essential step in research is understanding your desired outcome and why you’re buying a home. Doing this helps ensure that you make an informed decision that will bring satisfaction later on.
Finally, if you have a history of credit issues, it’s essential to note that these don’t guarantee you won’t qualify for an affordable mortgage. Lenders do use your credit history when setting their pricing and determining whether they can trust that you will repay the loan.
In conclusion, shopping for a mortgage can be similar to job searching–the more effort you put in, the better results will be! With these five tips in hand, you should be able to find an option that meets both your needs and budget. It’s worth the effort; it could save you thousands over the life of your loan if done properly. So don’t delay – start doing research now! You won’t regret it!
4. Shop Around
Just as you would shop around for a laptop or stainless-steel refrigerator, it’s essential to do the same when shopping for your mortgage. Getting quotes from multiple lenders is an essential step to guarantee you get the best deal and could save hundreds or even thousands of dollars over the life of your loan.
Many people make the mistake of seeking out a single quote from one lender, which could prove to be an incorrect decision. Depending on your credit score and home buying objectives, you could end up with a more costly loan with fewer benefits than desired. According to the Consumer Financial Protection Bureau, getting rate quotes from at least three lenders can save you an average of $300 annually or even more if you do some negotiation. In conclusion, mortgage shopping can be one of the most significant financial decisions you’ll make in a decade, so make it count by getting multiple quotes and being patient while doing research before moving forward – some lenders may be unwilling to provide you with competitive rates and terms if you haven’t taken time to learn about their offerings.
5. Get the Best Rate
Mortgages offer the unique ability to borrow a substantial sum of money — typically hundreds of thousands of dollars — and repay it over an extended period at a low interest rate. Mortgages stand out from other types of loans due to three main features: the money can only be used for home purchase; the interest rate is exceptionally low; and the loan term can extend up to 30 years.
Finding the best mortgage rate requires shopping around. Get quotes from lenders such as banks, credit unions and mortgage brokers and compare them. Doing this can save you a considerable amount of money over the life of your loan since rates can fluctuate frequently.
According to Freddie Mac, those who shop around for mortgage rates often save an average of $1,435 by receiving multiple quotes. You can maximize your savings even further by using Credible as a tool which helps you gather rates from several lenders based on your individual circumstances and preferences.
When looking for a mortgage, be sure to factor in not only current rates but also fees and closing costs as these can add up over time, affecting the total cost of your loan.
For example, a 0.25% higher rate on a 30-year fixed mortgage adds an extra $40 per month to your payment, totaling more than $14,000 over the life of the loan.
Mortgage rates are determined by several factors, such as credit scores, debt-to-income ratios and the type of mortgage you apply for – such as an FHA loan or USDA loan. If your credit history is strong and you make timely payments on other bills without any red flags on your report, then you should qualify for the lowest possible rate.