Buying a home is one of the greatest adventures. Therefore, ensuring you get the best mortgage deal is essential to having your finances in order, as it can make thousands of dollars’ worth of difference to your long-term expenses. However, mortgages can differ in many ways, meaning comparing deals may be tricky. Here are some tips to help you find the right mortgage deal.
1. Check and improve your credit score
Checking your credit score and credit report with one of the main credit bureaus can help you get the best interest rate for your mortgage. You can sign up for free with any of the bureaus to get your FICO Score and a comprehensive insight into what areas of your credit need to be improved.
Experian offers a tool known as Experian Boost that can slightly improve your credit score. However, you can also improve your credit score by paying bills on time and paying off credit card balances.
2. Use a mortgage broker
Choosing the right mortgage can be overwhelming, so getting a mortgage broker to advise you on the best deal for your situation is helpful. While some mortgages are only available when you apply directly (without a broker), others will only qualify when you apply through a broker.
It’s advisable to use an experienced broker to ensure you get the best mortgage deal. A qualified broker like certifiedmortgagebroker.com will be able to look at every mortgage on the market and recommend the most appropriate option for you.
3. Determine whether you qualify for any assistance programs
Be sure to leverage any available down payment assistance and closing cost programs, particularly if you are a first-time homebuyer. These programs can save you thousands of dollars on your home purchase.
The available programs vary depending on where you buy the home and the lender you choose. Talk to a couple of different lenders to have a good idea of what assistance programs are available for you. Some lenders may have specific mortgage products or promotions intended for first-time homebuyers.
4. Compare mortgage deals by interest rates
Mortgages come in either fixed interest rates or adjustable interest rates. Fixed-rate mortgages hold you to a constant interest rate that you will pay over the life of the loan. The section of your mortgage payment that goes towards principal and interest remains constant throughout the loan term. However, other aspects, such as insurance, property taxes, and other expenses, may change. Fixed-rate mortgages might be the right choice if you want to buy and own a home forever.
Adjustable interest rates may change over time. An adjustable-rate mortgage (ARM) often starts with an initial period of 10, seven, five or three years, and sometimes one year. Your interest rate holds steady during this period but may change periodically.
Adjustable-rate mortgages offer lower initial rates, but your rate may increase after the introductory period is over. Consider getting an adjustable-rate mortgage if you only plan to live in your home for only a couple of years.
5. Save for a larger down payment
If you dream of becoming a homeowner, consider saving for a bigger down payment as early as possible. The more you put down, the less your mortgage payment and the lower your interest will be.
Mortgage lenders accept lower down payments, but putting down less than 20% usually means you will have to pay for private mortgage insurance (PMI). Saving up for a larger down payment can help you completely avoid PMI.
If you can’t afford a 20% down payment as a first homebuyer, there are certain loans, grants, and programs designed to help you buy a property. Eligibility criteria vary depending on the program, but most options include low-down-payment conventional.
6. Get pre-approved
Before hunting for a home, apply for mortgage pre-approval with multiple lenders. A mortgage pre-approval dispatch shows real estate agents or sellers that you are a committed buyer. It’s proof that a lender has assessed your finances and determined how much you can afford to borrow. You will have to provide details about your income, assets, and debt to get preapproved for a mortgage.
Finding the right mortgage lender is more than getting a good interest rate and loan terms. While a little handwork can save you a few hundred dollars, you should evaluate lenders by the experience they offer. Look for a lender that aligns with your goals and needs to get the best mortgage deal and lock in your dream home.