Shopping for a mortgage is one of the most essential steps you can take when purchasing your home. Getting preapproved from multiple lenders can save you thousands in interest over its life, and negotiating your rate makes it even more cost-effective.
Mortgage comparison websites are an ideal starting point in your search for a loan. These platforms allow you to compare lenders’ mortgage offers based on certain financial details such as your credit score and down payment amount. Furthermore, they provide helpful tips about what factors to look out for when comparing rates.
Request Loan Estimates
Every lender is legally required to give you a loan estimate within three days of accepting your application and pulling your credit report. This document will include your mortgage amount, quoted interest rate, fees and closing costs – it’s just three pages long so it helps you quickly determine if you’re getting an advantageous deal.
Pay Attention to Interest Rate Quotes
When comparing interest rates, focus on the annual percentage rate (APR). This takes into account fees and other costs you cannot control, like prepaid mortgage taxes and homeowners insurance. The lower your APR, the better deal you’ll get.
Avoid Negative Amortization Loans and Points
Some lenders provide low interest rates due to upfront fees for “points.” Points are fees paid in order to reduce your mortgage rate. But if you plan to stay in the home for 10 years or more and can spare the money, buying points might not be necessary.
Points can add up to thousands of dollars over the life of your mortgage, so it’s essential that you carefully consider all options before deciding whether or not to pay them. Furthermore, take into account how long you plan on staying in your new home once you make a decision.
Enhance Your Credit Scores and Make a Larger Down Payment
A high credit score can lower monthly payments and prevent higher interest on your mortgage. Plus, it increases the likelihood that you’ll qualify for larger loans in the future, leading to even more savings in the long run.
Choose a loan term that works for you
The most common mortgage type is the fixed-rate loan. This option offers stability in both principal and interest payments throughout the life of the loan.
Check Your Credit History and Down Payment Size
First-time homebuyers have the best opportunity for getting a low interest rate by making a down payment of 20 percent or more. Those who can afford more should also look into longer loan terms, such as 30 years.
Invest in Home Inspections
Before you buy your new home, it’s essential to get an accurate home inspection. Doing so could help you avoid costly problems down the line such as foundation or roofing issues.
Before signing your mortgage documents, research lenders that specialize in your type of mortgage. Doing this can reduce closing costs and boost the likelihood of a smooth closing.