A mortgage is a loan in which property is used as a collateral. The borrower enters into an agreement with the lender after which the borrower makes payments for the loan in installments until the amount is fully paid. These loans are mainly offered to home buyers who may not have enough cash to do it. In your plan to take a mortgage loan, it is important to first assess the term dates, interest rates and the amount of payments per period before getting into it. A lower interest rate can save you thousands or even tens of thousands of dollars over the life of the loan. Here are some simplest and most effective ways you can ensure you are getting the best mortgage rates.
Improve your credit score: Your credit score is the most important factor in determining your interest rate. The higher your credit score, the lower the interest rate will be. Besides, a higher credit score shows lenders that you are less likely to default on your loan. Therefore, it is important to ensure that your credit scores remain as high as possible. This can be achieved by paying off your credit cards balances, removing your credit collection accounts and getting added as an authorized account user. Here are more tips on improving your credit score.
Use mortgage quotes to negotiate: When shopping around for favorable mortgage rates, it is important to note that the lender’s quote is never fixed. In most cases, lenders increase fees and rates to increase their commissions.Once you get a mortgage rate, use it to negotiate the best mortgage rate. Take a quote from one lender to the other asking them to beat it.
Do sufficient rate shopping: Interest rates and fees varies with each lender. It is therefore important to apply with multiple online mortgage lender for comparison. FICO allows for multiple credit inquiries thus you should not be worried of lowering your credit scores, searching and comparing multiple lenders cannot affect it.
Make a bigger down payment: You will get a lower mortgage rate if you put more money down while a lower down payment gets you to higher interest rates You will be on the safe side if you can pay at least 20% of the cost of your home first. However you can pay lesser down payment if you are dealing with private mortgage insurance because they accept as low as 5%.
When it comes to buying a home using mortgage loan, it is important to use your loan estimates to compare cost. Every lender should provide you with a statement of potential loan terms and cost before you commit. Secondly, do comparisons with as many banks and creditors as possible to shop for favorable interest rates. In this case, prioritize credit unions in your search because most of them are non profit lending institutions.