The fact that you are reading this article means you are looking to buy a home and would like to know how to find a good deal for your home loan. Maybe you want to buy a house but are not sure where to start. The easiest way to start is to use a company like OwnUp. We will discuss all the basics that will either make or break your loan application. Follow these, and you are guaranteed to land a good deal for your dream house and a great mortgage interest rate.
The takeaway is for you to get your finances in order. Clean up your financial record. It is important to know that interest rates and mortgage deals are personalized to your financial situation, so the cleaner your record looks to the lender, the higher your chances are of getting a lower interest rate and best mortgage rate. A lower credit score reduces the interest rate and allows you to get a good lending rate. The point is to be a lower risk borrower by doing the following:
Improve Your Credit Score
This is top of the list because credit scores are an individual’s financial footprint. It details your credit history and tells your potential lenders how well you handle your finances, debt, and, ultimately, your spending habits. The credit score shows lenders how responsible you are with money and how often you are borrowing money. The first thing to do is get your credit report using various free applications because the independent mortgage broker will look for this report or your fico score as well.
Why Is My Score So Low And How Can I Improve It?
Your score can be low due to too much debt and having over 30% credit usage. Skipping monthly debt payments on existing debt and default court judgments can reduce this number. To improve your credit score, start by paying off all your debt. This includes high credit card balances, student loans, and personal debt (with less debt to pay off, you have extra money to pay into your mortgage loan). Ensure that all your monthly payments are on time and reduce requests for new credit
Either Make A Bigger Down Payment Or Decrease The Loan Repayment Period
Before you buy a house, decide how much you can afford to pay per month. Once you have that number, you can get a loan estimate of the loan amount to borrow from the bank and start looking for your dream home within that budget. Start saving for a large down payment that you will pay upfront. A larger down payment means that the total amount that the lenders will give you is less, and so will the interest. This money you save should at least be 20% of the purchase price of the house. The deposit affects the loan-to-value ratio. If you have not saved enough, then you can opt to reduce your loan term from 30 years to 25 years or to any term where you feel comfortable. This will mean that your monthly repayments will be higher. The more you pay off monthly, the more you reduce the life of the loan and the less interest you pay. Not paying at least a 20% deposit on your house means you might need to take Private Mortgage Insurance.
Secure A Long-Term Steady Job
Mortgage brokers always want to know that you will be able to afford the monthly mortgage repayments. To do this, they look for at least 1-year steady income. If you are fond of job-hopping and sometimes having months of no employment, this will give the lender the impression that your income is unstable, and you could be deemed a high-risk borrower who will not be able to make the monthly mortgage payment and, as such will not get a good deal.
Earn More Money And Reduce Your Debt To Income Ratio
Lenders look at how much you earn, and they usually favor whoever earns a lot of money as that person is considered a low-risk borrower. Increase your income streams or negotiate a salary increase. This will put you in a favorable position, and as such, you will get a great mortgage rate deal. Make sure that your debt to income ratio (DTI) is balanced. If you have a high DTI mortgage lender, you might not be able to pay your monthly mortgage payments. You could also weigh the differences between a fixed-rate mortgage and an adjustable-rate mortgage. The fixed allows you to lock interest and pay less in the long term. Other things to consider are homeowners insurance and property taxes while going through the mortgage process. What is most important in this process is getting a mortgage pre-approval. The real estate agent should be able to help you with this and analyze various loan offers and the loan’s interest rate.
At the end of the day, the trick with getting a good deal is to shop around, apply to multiple lenders and negotiate how much interest you will pay. Once you have many loan mortgage offers, you will make a good decision. Use a mortgage calculator to compare all the deals and find what is best suited for your needs. Play around with a lot of scenarios to get the best mortgage rates, interest rates, and loan terms with the best closing costs. After you get that house, do not miss any monthly payments.