Helpful Mortgage Tips Regarding Credit and Interest Rates

Exercising due diligence while shopping for a mortgage interest rate that suits your needs is essential and you will want to take time in examining all of your options until your needs are met. Utilizing the informative details below to prepare yourself for the procedure of acquiring a home loan and interacting with a lender is a step in the right direction.

  • Did you know that credit card debts typically carry a higher interest rate than mortgages? When purchasing a new home, most people focus on saving money for their down payment, when they should first focus on paying off their debts. Borrowers with less debt are deemed more creditworthy and are often approved for mortgages more quickly.
  • Are you capable of paying the monthly mortgage payment on your potential home, but are incapable of coming up with thousands of dollars for a down payment? Look into down payment assistance programs that may be offered by the government for your area. Go to the American Dream Downpayment Initiative page on the U.S. Department of Housing and Urban Development website to learn more about available programs in your state.
  • It is a good idea to explore all of your options when shopping around for a mortgage rate. Along with banks and credit unions in your area, you may find it beneficial to check online banks and lenders to find the best rate available.
  • Are you monitoring mortgage rate trends? This trick may help you determine downturns in the market and help you determine if now is really the best time to purchase a new home. If the rates are continuously dropping, it may be worthwhile to wait. If the rates seem to be rising, now may be the best time to lock in a rate with a fixed-rate mortgage.
  • The type of mortgage you choose will depend on your plans for the future with this new home. If you plan to stay long term, a 30-year mortgage may be the best choice. On the other hand, if this is a starter home, you may want to consider an ARM with a lower interest rate or a shorter term.
  • Keep in mind the number of mortgages you are applying for. Along with the application you submit, the lender will also do a credit check. If a certain number of credit checks are done in a short period of time, it may bring down your credit score and ultimately damage your report.
  • Whether you are buying your first home, or are simply looking to move to a bigger space, it is a good idea to seek advice to avoid making costly mistakes. Housing counselors may be able to help you evaluate your situation and help you determine what you can afford, with an unbiased opinion.
  • It is a good idea to shop around with multiple lenders when buying a home. If you apply for a certain type of mortgage and are declined, do not give up. Go to a different lending institution and apply. Each may have their own qualifications, giving you the chance to get the mortgage you desire.
  • Afraid of being hit with surprise charges and hidden fees when you go to close on your new home? All lenders are required to provide you with a "Truth in Lending" statement which includes all of this information. Also, be sure to read all of the fine print to avoid any surprises.
  • Are you not sure where to find a reputable mortgage lender? Ask a friend or co-worker to see if they have anyone, they can refer. In addition, the website for the Department of Housing and Urban Development (HUD) lists approved lenders by state to help you find one with ease and convenience.
  • Do you have some extra cash? Consider making a larger payment on your mortgage than is required. Adding a few extra hundred dollars to your payment can reduce your balance significantly over time and lead you to an early payoff date.
  • Thinking of borrowing against the equity in your home to finance an upgrade or much needed repair? Consider the affect this extra loan will have on your finances in the future and weigh it against the benefits of the loan. For example, is the loan worth the thousands of extra dollars and many extra years that will be added to your mortgage before its payoff date?
  • Did you know that paying off your mortgage early could come with a prepayment penalty? Some lenders impose a fee on borrowers who pay off their mortgages before the maturity date, assuming that state laws allow for such a penalty.

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