With the slowing housing market, rising interest rates and lenders tightening the reins on their mortgage qualification requirements, it s extremely important to get the best mortgage at a good interest rate. Keep reading for four tips you can use to get the best mortgage in today s residential real estate market.
1. Work on your credit.
If your credit score isn t good, make the effort to work on rebuilding it. Now is not the time to accept a higher rate just because you have poor credit. Spend a year or two making sure all your payments get in on time, stop applying for new credit (because that actually works against your credit rating) and you will reduce the balance on your double digit interest credit.
Because interest rates are already rising, you can t afford to lock in at a credit penalty rate. Remember, taking an additional year or two before purchasing a home could save you tens of thousands of dollars over the life of the loan, so have patience.
2. Build a sizable down payment.
Having a strong down payment of 20 or more puts you in the driver s seat and allows you to direct negotiations with lenders. Not only will you save on the need to purchase private mortgage insurance (PMI) and lower your interest rate, you ll also walk into your home with pre established home equity.
This will provide you backup equity in case of a financial emergency, and you ll have a strong financial foundation that s not easily rocked by economic instability.
If you re having trouble coming up with a larger down payment, try accessing 401K reserves or negotiating a loan through financing from your family.
3. Opt for the stable lender.
With fly by night mortgage companies closing their doors and selling their loans on the secondary market, you want a lender that s going to give you good customer service and do so for 30 years.
Don t make the same mistake as the countless thousands who lost their homes because of bad lender decisions; opt for a stable, reputable lender. Look for a financial provider whose personnel answers your questions, doesn t try to rush you and is genuinely interested in helping you get the best loan.
A legitimate lender won t pressure you into quick and expensive decisions without addressing all your questions and concerns. So if anything about the process lending agreement is not clear, make sure you discuss it with the lender and assess their willingness to spend time with you.
If you re stuck, ask around your neighborhood or seek family and friends for advice on their lenders. Having customer referrals from people you trust is invaluable, especially when you re dealing with what it likely the largest expense of your life.
4. If interest rates are too high, don t lock in.
While an adjustable rate mortgage (ARM) means your monthly mortgage payments can still go up with inflating interest rates, you also don t want to lock yourself into a 30 year fixed rate mortgage with a high percentage.
Whatever you decide, remember that if you have substantial home equity and good credit, you can always renegotiate or refinance down the line if interest rates come back down. |
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