4 Tips For Getting a Great Deal on a Mortgage
When purchasing a home, one of the most important factors that every buyer takes into account is the sticker price. Clearly, money is a key consideration — but you should realize that many other factors aside from sticker price will also influence the final amount you pay on a new home. Closing costs are rather famous for complicating the cost of properties, for example; as is the price of paying an inspector to ensure that your seller is telling the full truth and nothing but the truth!
One of the most commonly overlooked factors that determines the price of a new home, however, is also one of the most significant. With mortgage rates going as high as nine or ten percent, it is possible that the cost of your mortgage could end up being just as high as the cost of your home — which is why it is just as important to work on getting a good mortgage rate as it is to work on finding a reasonably-priced home.
The good news is that mortgage rates are actually far more controllable than real estate prices — and improving your mortgage rate could save you tens of thousands of dollars over the long term.
Here are four of the most effective methods of paying less for your mortgage:
- Improve your credit score.Paying off your existing debts, raising your monthly income, making on-time payments, and possibly even opening up a new line of credit are all straightforward methods of increasing your current credit score. If you can manage to earn a better score, one of the many perks that awaits you is a more affordable interest rate on your home loan.
- Make a larger down payment.Paying more on your down payment means paying less for your loan — and the overall reduction in interest rates associated with larger down payments is almost guaranteed to work in your favor. Moreover, homeowners who pay more than 20 percent of their home’s overall value with a down payment are able to avoid paying prime mortgage insurance (PMI), which can save you over one percent of yourhomes value over the course of your mortgage.
- Demonstrate substantial cash reserves.The ability to make a large down payment is one of the primary reasons why people tend to work on increasing their savings before beginning the home buying process. Another important reason? Demonstrating liquid assets (i.e. cash) to potential lenders will also provide significant reassurance to these institutions. And the less risk you represent as a borrower, the less interest you will be required to pay.
- Decrease your debt to income ratio.One final factor that is also used to determine how much of a risk you are to lenders is your debt to income ratio. The less money you currently owe, the safer of an investment banks will consider you tobe.ç
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