No one wants to pay high interest rates on anything. High interest rates mean that the lender is getting back his money two or three times over for one product. Unfortunately, this is the cost of doing business in a credit world. When it comes to your mortgage interest rate, you will be paying for it longer than you will for most things that you buy. Here are seven tips to find the best mortgage rate.
1. Shop around. It is a fact that if you do the work, you will reap the benefits. Don’t just go to the friendly hometown bank because you have a checking account there. Banks are looking out for their own interests and may offer you a loan that is not in your best interest. Look for other options before deciding on a loan for your home.
2. Work with a mortgage broker. A mortgage broker is working for you. As their client, they are looking at all the loans available to find the one that is the best fit for you. Based on the information that you have provided, they get a picture of the person buying the home and can offer you what you need.
3. Don’t borrow more money than you need. Lenders love to say that according to your income to debt ratio, you can buy a $150,000 home. Well, if you only make $35,000 a year that is not going to work with your budget unless you find a higher paying job. Getting sucked into purchasing a home that you can only afford on paper is a no-no. It can ruin your credit and you could lose your home.
4. Don’t settle for the party line. This occurs when a lender who is working for you only gives you one option. Even for the person with the worst credit history, there is more than one option. It is also a red flag when that only option is the one that is endorsed by a certain bank or mortgage company. Your mortgage professional is supposed to be looking out for your best interests, not their own. Choose another mortgage professional if you run up against this situation.
5. Use a credit union. Credit unions are different from banks. While they are both financial institutions, they don’t operate in the same way. A bank has a group of investors that they are loyal to. These people vote for policy not the customers. At a credit union, the owners are the members. Credit unions are mostly not for profit and can offer their services at a lower cost to the members. Mortgage loans can be offered at lower interest rates for new homeowners.
6. Look at your credit report. Each person is entitled under the law to obtain a free credit report from each of the three reporting bureaus each year. The credit report should be checked for errors as well as the score. Low scores mean that mortgage interest rates will be higher than for conventional borrowers with better credit.
7. Improve your credit score. Get financial advice on ways to better your credit score. The answer is not always to pay off all debt. There may be other solutions that look better to lenders. It is a fact that improving your credit score will improve the chances for a better interest rate.
For the best rates, start with these seven tips.