On the journey of buying a new home, one of the most important steps is to get the best possible mortgage in terms of overall cost. There a few things you can do to ensure that you have access to a lower interest rate, and therefore lower monthly mortgage payments. This can save you thousands of dollars over time. While it may not be easy to get the exact rate you want, the following steps can help reduce the cost of your monthly payments.
Take action so as to ensure you have the best possible FICO score
Every single lender will review your credit score and credit history. This helps them determine the potential risk of lending to you. The lower your credit score, greater the risk you will appear to be. If you seem like a high risk to a lender, the lender will be far more likely to increase the interest rate offered on your mortgage. Over time, a high-interest rate can add up to thousands of dollars.
This means that it is important that you do what you can to improve your credit score prior to mortgage shopping – even if it causes a delay to your home shopping process. While it is important to establish a good credit history over time, if it is urgent that you improve your credit score in a shorter time frame, companies such as Lexington Law are there to help you. For approximately $120 a month, Lexington Law can improve your credit score in fewer than five months. It’s important to keep your end goal in sight: the higher your credit score, the lower your monthly payment, which will increase your buying power and help you on the path to getting the best available mortgage rate.
Build up a down payment
If you don’t have the time needed to repair a bad credit score, then a good alternative is to make a larger down payment. A large down payment lowers your perceived lending risk and can allow for a lower credit score. Even if you have good credit, a large down payment can lower the amount you will pay towards interest on your mortgage. This will also decrease the total amount you spend on your mortgage over time.
Shop Loan Officer’s not Lenders
According to the Consumer Financial Protection Bureau (CFPB), 50% of mortgage borrowers do not shop around when deciding on a mortgage. Even though mortgage comparison sites allow shoppers to browse through rates offered by a range of lenders, this does not necessarily allow them to see the best possible rates available to their own unique financial situation.
This is because interest rates not only vary by lending institution but by loan officers as well. Even though two loan officers might work for the same lender or bank, they are likely on different commission rates, thus allowing them to offer completely different rates for the same mortgage to the same borrower. Therefore, it is imperative that you shop around with as many different loan officers as possible – both on and offline.
Consider Additional Costs
Often times, first-time home buyers forget to consider the additional costs that come with the purchase of a property. You should always be on the lookout for the fees and additional costs that may come along with the purchase of your new home. In some cases, it may be possible to avoid or reduce the cost of these fees. Be sure to review your Loan Estimate so as to ensure that the rate versus cost is appropriately proportioned.
An easy way to be sure you are aware of any potential additional costs is to utilize Parlend’s patent-pending mortgage calculator. This mortgage quote calculator is available online and can show you any additional costs that will go along with a given rate, based on your own unique risk profile.
Get Pre-qualified without getting your credit pulled
When it comes to purchasing a mortgage, there are two ways to get qualified:
Pre-qualification does not necessarily require a credit pull. Instead, your agent only has to know that you have sufficient credentials to obtain a mortgage and that you will be qualified.
Conversely, pre-approval requires that you go through the process of submitting your income and asset documentation for underwriting in advance. The downside of this is that when you actually do find and purchase a house, you will have to go through this process again. However, if you are unsure about your credit or income, then this is likely the best method for you.
Finding the best mortgage rate before finding your house is like trying to find the cheapest gas station before you buy a car. By taking the time to find the best deal ahead of time, you put yourself in a better financial position for a better home-buying experience. Not only that but finding the best mortgage quote can mean saving thousands of dollars on the cost of your mortgage.