Mortgage Lesson 2: Top 5 Tips for Getting the BEST Mortgage Rate Possible
For most prospective homeowners, a mortgage represents the largest monthly expense you will EVER have. Understanding how to get the BEST rate possible starts with the basics. As complicated as mortgage rates may seem, it really does start with these simple factors.
1. CHECK YOUR CREDIT. Before shopping for a home you need to review your credit reports. Correct any negatives or inaccuracies that you may find, pay your bills on time, and don't open ANY new accounts. A change in your debt-to-income ratio or inaccurate information that causes your credit score to be lower than what it should be will cause you to pay a higher interest rate on a mortgage.
2. CHOOSE THE RIGHT LOAN. Your loan needs are based on current market conditions and how long you plan to stay in your home. Fixed-rate mortgages are generally better for those who plan to stay in their home for a longer period of time before re-selling. It takes most borrowers several years just to earn back their original closing costs in home equity. Choosing the right loan also goes hand-in-hand with working with the right Mortgage Professional who can you advise you what is the best fit for your needs and circumstance.
3. COMPARE RATES AND LENDERS. A loan officer can offer certain loan packages, and a mortgage broker can shop your deal around to various lenders on your behalf (Don't know the difference between a lender and a broker? I wrote a BLOG ARTICLE about it recently, so check out that link if you need clarification). Rates may change several times a day; compare loan packages at the same time to determine the best deal.
4. PAY ATTENTION TO TERMS. The Annual Percentage Rate (APR) is the true cost of the loan, which includes any fees from the lender. Don't be afraid to ask what a particular fee is for and if it can be reduced or eliminated - terms are negotiable, so it can never hurt to at least ask. Also, the costs for a 10- 20- or 30-year loan will vary. Shorter terms equal faster equity but larger monthly payments.
5. DON'T WAIT FOR RATES TO GO DOWN! Rates are much more likely to go up instead of down and will not stay at today's low rates forever. Rather than worry about rates, concentrate on building equity quickly. Consider paying $25, $100, or $500 extra toward your mortgage monthly and you'll more than offset any rate you are paying.
"Knowledge is power." These suggestions are just the tip of the iceberg. Contact me here for more information and references for trusted Mortgage Professionals in the area.