If you're buying a $100,000 home, just a one percent increase in your mortgage rate will cost you an extra $1,000 per year. If you're in a more expensive area or see a bigger rate increase than one percent, the extra costs of a mortgage can really add up. Here's what you need to do to get the lowest rate.
Stop Applying for Credit
Are you thinking about opening a home improvement store credit card to spruce up your new home or buying a new SUV to help you move everything? Don't.
You should stop making any new applications for credit at least one year before applying for a mortgage. New credit inquiries significantly drop your credit score for the first few months after they make them.
Your mortgage lender will also wonder if your needing credit means you'll have trouble paying your mortgage. Finally, if you do open a new credit account, your credit score will also drop because your average age of accounts score factor will be lower.
Get Your Finances in Order
Most banks will want to go through your tax returns and bank statements for the last two years with a fine-tooth comb. They want to verify your income and see that a mortgage can fit in with your budget and typical spending patterns.
This can feel intrusive, but it's unavoidable if you want to work with a bank that gives the best rates. Don't get upset and only begrudgingly turn over a stack of disorganized papers.
Organize your statements into folders and provide a summary so they're easy for the lending officer to follow. They'll feel that you know how to handle your money, and will reward you with a better approval.
Find a Mortgage Before You Find a House
If you're thinking about moving, start by finding a mortgage. First, you want to know how much you can get approved for at different rates. The more you borrow, the higher the bank's risk, so the higher your interest rate will be.
More importantly, you don't want to find your dream home and then rush into a mortgage. If you don't have time to shop around and need to go with the bank that will approve you fastest to avoid missing out on a home, you could end up paying much more.
To learn more about how to get the best rate on a mortgage or to request a mortgage quote, contact a professional who is knowledgeable about the mortgage rates in your area.Share