5 ways to get the best mortgage deal
Buying a house usually means going through the process of finding a mortgage. While it’s easy to find a mortgage, it can be a lot more complicated to make sure that you’re getting the best deal. In addition to a low interest rate, a good mortgage should also have low closing costs and great customer service. In order to find a good mortgage, follow these tips.
- Get your credit score as high as possible. Start by getting copies of your credit reports and look for errors. Work on correcting any bad information, then work on mistakes. While it isn’t always possible to get notations of bad incidents removed, it’s worth it to try. If you can’t fix anything, consider waiting a few months for bad information to fall off of your report.
- Be honest on your loan applications. In today’s market, everything is going to be checked, so it doesn’t make sense to lie about your credit score or leave off assets and loans. If you need to use income from a bonus or second job in order to qualify for the loan, be prepared to show proof.
- Make as big of a down payment as you can. The more of your money that you’re willing to invest, the less risky the loan is for the bank. That means a lower interest rate if you can come to the table with a large down payment. Try to save at least twenty percent of the value of the home before mortgage shopping. Of course, make sure that you can still afford your moving costs and the closing costs on the mortgage.
- Don’t just look at the interest rate. While the interest rate can be important, its also critical to consider the fees and other charges that come along with the mortgage. Closing costs and
other fees can add up to a lot more than the monthly interest charges.
- Know how much your home is worth. This is critical if you’re doing a refinance, but it is also important for first time home buyers to know what the asset they’re buying is worth. Homes that are mortgaged for more than their appraised value tend to have mortgages with higher interest rates. If you know what your home is worth, however, you’ll be in a better position to negotiate a lower rate.
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Researching The Best Mortgage Rate
Are you in the market to refinance an existing mortgage? Are you about to purchase a new home and are interested in finding the best mortgage rate possible?
Shopping For The Best Rate Possible
Many leading mortgage and financial experts will tell individuals to thoroughly shop the entire mortgage rates market in order to identify the best one. However, many people simply do not know what this task fully entails. If you are able to find an extremely low rate mortgage then you could be saving yourself tens of thousands of dollars over the long term. It is very important to be diligent in your research and preparation of the right rate and loan for you.
A Mortgage Rate Example
To offer you an example of just how important it is to find a low rate mortgage, consider that securing a $300,000 mortgage over 30 years would likely yield a monthly payment of just over $1,500 at a rate of 4.5 percent. If on the other hand you secured a rate of 5.10 percent, such a rate would increase your total monthly loan payment to just over $1,600 per month. Stretched over 30 years that is over $40,000 in mortgage fees that you would be paying at 5.1 percent versus the lower 4.5 percentage rate. As you can clearly see in this example it is extremely important to make sure that your mortgage rate is the lowest that is can possibly be.
Your Credit Score
When searching for the best mortgage rate possible it is very important to find out what your current credit score is. You should run a credit check on yourself using Equifax or another credible credit rating agency that will give you a report that shows what your overall credit score is. Once you get the credit report you should print it out so that you can present it to prospective lenders yourself. This negates the need to have multiple creditors run the credit check themselves which will inundate your credit report with inquiries that can ultimately lower your score.
Narrowing The Selection Down
When you’re in the market for the best possible mortgage rate it is always a great idea to find a prospective lender that has an excellent service record. This will give you the peace of mind that comes with knowing they will be easy to deal with in the future. There is nothing worse than dealing with a long term lender with a poor service rating. If you want first hand reviews on the service rating of prospective lenders then ask your family and friends who they recommend. Once you are able to narrow down highly reputable mortgage lenders to two or three possible candidates then you will need to cross compare the rates of each.
Establish Your Rate & How Much You Should Borrow
When you’re searching out the best possible mortgage rate it is always an excellent idea to have established a maximum budget beforehand. Calculate how large of a mortgage you can afford and then diligently stick to that figure. You should also calculate what sort of rate you need. Don’t begin looking for a mortgage until you have established these two important figures beforehand. Doing so will make the mortgage rate search much less stressful than it needs to be.
When discussing mortgage options with a prospective lender make sure that you ask them to provide you with a variety of different available terms. Look over each offered set of terms closely to decide which loan option will make the most sense for you to pursue. Often times lenders will offer low or exceptional promotional rates that you will need to act fast on in order to secure them. Thus it is always a great idea to explore the lender’s full range of lending options.
Never Limit Your Search To Just One Lender
The worse thing that you can do when seeking out the best possible mortgage rate is to get lazy and only explore the available rates of one lender. Many experts state that you should consider at least 3 to 4 lenders before narrowing your choice down. Besides the mortgage itself many lenders offer much different option packages and mortgage related services. It is an excellent idea to cross compare them all in order to find the best one for you.
2014: A Prospective Housing Market
The new calendar year is quickly approaching, alongside a host of new financial regulations and further oversight for the housing market. Paralleling these new policies in 2014 borrowers will likely notice the novel emergence of 5% mortgage rates. It appears that these new mortgage rates will be a product of recent Federal regulatory actions.
Chief Economist Frank Nothaft at Freddie Mac, proclaimed recently that by the end of the calendar year of 2014 mortgage rates might very well peak at 5%. The Chief Economist suggests that the campaign of quantitative easing by the Federal Reserve Bank of the US is likely the fundamental item that is responsible for the aforementioned shift in the housing market.
The Chief Economist additionally asserted that if Janet Yellen is confirmed as Chairman of the Federal Reserve Bank, among her initial actions will include acquiring a “consensus statement” from the Federal Open Market Committee that reveals the extent to which the Fed will taper and if so, when and by how much approximately.
Mortgage rates will take a hit from the tapering in the beginning, however tapering will be gradual in order to avoid further volatility, Nothaft maintained. While surmising that, “I do think in the first half of the year they will announce something on tapering, and they will start to pull back. But when you have a big investor like the Fed scale back their purchases, it will lead back to an uptick in yields, which will translate into higher mortgage rates.”
Nothaft also noted that “at some point, the Fed will scale back their bond purchases, but when they will will start and how gradual it will be, is very unclear.”
Though, the consequences of higher mortgage rates and shuttering bond purchases will impact borrowers, Chris Randall who is a Capital Markets VP at Real Estate Mortgaging Network stated “as rates climb…it will be much harder for the family to make the next step as interest rates rise. Supply will be tight and there will be a lot of people trying to make the next step.” Randall ascertains that there will be greater consolidation in the market yet, remaining efficient is a necessity as lenders without a prompt fix on the shifting market will lose out.
Nothaft maintained that higher mortgage rates will pose a challenge for “high-cost markets” despite the potential that “even if rates go up to 5%, given the level of house prices and family income, most markets would remain affordable and the monthly PITI would be below 28%.”
In addition, if mortgage rates continue to rise it will validate Freddie Mac’s prediction that 2014 will yield a “purchase-driven market”, prospects absent since 2000. Nothaft warned however, that a purchase-driven market will not account for a deficit in refinancing and estimates an additional $1.4 trillion in “primary mortgage originations” for 2014.