A house is one of your biggest investments. Buying your dream home will cost a lot of money. The mortgage rate of your house may eat into your budget and savings. This might lead to more costs in the future and you might have to earn more to keep your house or stay up to date with payments. Here are ways to get the best mortgage rates:
Have a Good Employment Record
Lenders want a debtor that has the capacity to pay their dues on time. One way to achieve this is to have a good employment record. A stable job and earnings of two years or more with the same employer indicate that you can pay for your mortgage. Bring pay stubs and other documents as proof during the interview. You might have a difficult time getting the rate you want if you have several part-time jobs or self-employed.
Good FICO Score
Your credit score plays a major role in getting a low rate or one that is costlier. This rating signals to potential lenders how you manage your finances. A high score will likely net you a good rate throughout the mortgage term.
If you have a low score, it will take time to improve it. Achieve this goal by paying bills on or before their due date and pay your credit card in full. If you can’t pay your credit card in full, keep it within 20% of your limit. These small steps improve boosts your score and may save you hundreds of dollars.
Bigger Down Payment
A big down payment improves your chances of getting a good mortgage rate. Experts agree that 20% (better if higher) cash payment gets you a low rate. Creditors allow low down payments, but if that number dips below 20%, you’ll start paying for private mortgage insurance. This adds up over the term of the mortgage.
Before purchasing your dream home, try to save as much money as possible. Once you have the desired amount, apply for a mortgage.
Length of Stay in House
Before you consider getting a mortgage or paying down payment, think about how long you’ll stay in the house you want to purchase. Some people only look for a short term home before moving into one closer to their work and big enough for their planned family. If you think the house you are about to buy suits your long term needs, then get a mortgage and choose between a fixed or adjustable rate. Both have advantages, but it will depend on your budget and if you see yourself living in that neighborhood for a long time.
Consider an Adjustable Mortgage
Some homebuyers think that a 30-year mortgage is not for them. You might save some cash by taking a lower rate for five, seven, or 10 years. You can take this option with an adjustable-rate mortgage. The interest rate for this may increase after the fixed period.
These ways may enable you to find the ideal mortgagee rate within your budget and meets your future homeownership plans. Weigh the options and get the pros and cons of each lender to make an informed choice.