When applying for a mortgage, you will notice that rates vary greatly. These rates determine on a number of things, including the length of your mortgage term, the size of your deposit, your credit score, and which lender you choose. With so many different mortgage lenders available to choose from, this can be a daunting process, especially for first time buyers. Securing the lowest rate is incredibly important, as it will make your monthly payments smaller, thus saving you money over the whole lifetime of the loan. Here are a few things to focus on during your application process to ensure you get the lowest rate possible.
You wouldn’t buy a car without driving a few first, or a mattress without laying down on more than one, right? In a similar way, if you want the best mortgage rate, you should shop around with different lenders. This process should entail researching different lenders and the products they have to offer, as every lender has different loan types, terms, and interest rates. You also should apply for more than one lender, and lenders of more than one type. This means including banks, credit unions, and specialized mortgage companies in your search.
Improve your credit score
Your credit score is one of the most important things that lenders look at when they are considering approving you for a mortgage. You want to look like as responsible of a borrower as possible. The more confident the lender is that you will repay your loan on time, the better rates they will offer you. To improve your score, pay all your bills on time, eliminate debt, and pay off your credit cards. Check your credit score regularly and make sure the credit bureau isn’t making any mistakes on your report.
Build a strong record
It is important for you to have a strong record of employment when applying for a mortgage. Showing steady employment and earnings, especially if it is all from the same employer, will drastically increase the confidence the lender has in you to make your payments on time. Also prepare proof of bonuses and commissions you have earned, if applicable.
Shorten your term
Although it may not seem like it, you can save a lot of money by shortening your term. While it’s true that switching from a 30 year to, say, a 15 or even a 20 year mortgage will make your monthly payments higher, you will save thousands on interest over the lifetime of the loan. You will also benefit from the fact that you are paying down more of your principal faster than you would on a longer loan.