Your dream home is waiting for you, but to make your dream come true, you will first need to get approved for a mortgage. You might be feeling a little lost if you’ve never applied for a mortgage before.
Don’t worry too much. These tips will help you get started on the right foot by helping you get the best interest rates available.
1. Take a look at your current situation
Many people think that getting the best interest rates is all about doing a bit of comparison shopping. The truth is you first need to take a look at your situation and your finances. Then, if the time is right, you can start comparing interest rates.
2. Think about your employment situation
It should be a lot easier for you to get good interest rates if you have a steady job and a stable income. If you have been going through long periods of unemployment, or if you are self-employed, maybe it will be difficult for you to get approved for a mortgage.
If your current employment situation is less than ideal, maybe you should wait at least a few months before applying for your mortgage.
3. Do what you can to improve your credit score
You don’t need a perfect credit score to apply for a mortgage, but having a great one will help you get your hands on better interest rates.
Paying down your credit card balances on time, consolidating your debts, and varying the types of loans you have are all examples of things you can do to improve your credit score.
4. Consider increasing your down payment
If you can increase the down payment on your dream home, you should be able to get better interest rates on your mortgage.
Your down payment should cover at least 20% of the price of the home you want to buy. If you don’t think this is possible at the moment, maybe you should keep saving up for a larger down payment.
5. Learn more about the cash reserves you would need
Your cash reserves would be the number of house payments you have saved in cash. If you don’t have cash reserves of at least 2 months’ worth of your house payments, you will represent a higher risk for mortgage lenders.
If you represent a lower risk for lenders, or no risk at all, they will offer you better interest rates for your mortgage.
6. Decide whether the time is right to apply for a mortgage
Now that you have taken a closer look at your current situation, decide whether the time is right to apply for a mortgage, or if you should wait until you can improve your situation and your finances.
Maybe you can start by comparing the rates offered to you before taking the best decision possible.
7. Check with your bank
Start by checking with your bank or credit union, and ask them about their mortgage rates. Maybe you will find that the rates they are offering you are meeting your expectations, and since you have an account with them, applying for a mortgage should be more simple than if you were applying with a different mortgage lender.
8. Compare mortgage interest rates online
If you feel like the rates offered by your bank or credit union are not the best ones you could get, go online to compare mortgage interest rates from different lenders. There are many websites and online tools that can allow you to quickly find the best rates available for you.