You are tired of renting and are ready to be a homeowner. However, do not make the mistake of getting into a mortgage you can't afford. Mortgage companies consider several factors, like your credit score and income, before deciding what interest rate you will pay. Here are five helpful tips for getting a good rate on your mortgage:
Improve Your Credit Score
Your credit score is a big deal to mortgage lenders. If you have a good credit score, lenders will think you are more likely to pay off your mortgage. According to Bankrate, lending companies give the best mortgage rates to individuals with credit scores of 740 or higher. If your credit score is lower than that, take the necessary steps to improve it. For example, you could start paying more than the minimum balance on your credit cards.
Save Up for a Down Payment
Before you apply for a mortgage loan, it is very important to save a decent down payment. If you make at least a 20 percent down payment, you may get lower interest rates. You can save the money faster by cutting out unnecessary expenses, such as cable bills or eating out at restaurants.
Pay Down Your Debt
If you currently have a lot of debt, lenders may worry that you will not be able to afford your mortgage payments. Whether you have college loan or credit card debt, pay down a good chunk of that debt before applying for a mortgage loan.
Consider a Short-Term Loan
While your initial instinct might be to choose a long-term loan, it could end up costing you more in interest in the long run. If you opt for a short-term loan, you will have higher monthly payments, but you will save a lot of money on interest costs.
Prove That You're Steadily Employed
Steady employment is another important factor lenders consider when determining your mortgage rates. If you have long periods of unemployment, the lender may wonder if you can afford your mortgage payments. Make sure you have your income tax returns and other necessary documents ready before you walk into a loan office.
If you follow these helpful tips, you will have a better chance of getting a good rate on your mortgage. If you do not get a good rate from the first mortgage company you communicate with, do not hesitate to shop around for a better rate.
Share14 June 2016
When it comes to borrowing cash for a new house or a nice car, how much money do you really need? Although you might be tempted to mortgage yourself to the brim or borrow a little more than you should, the fact of the matter is that everyone has financial limits. My blog discusses the impact of borrowing more than you need, so that you can make smarter decisions with your money. In addition to keeping you out of trouble, this valuable information might also improve your quality of life and protect your financial future. You never know, it could make all the difference.
