Want To Buy A Home? Two Tips For Getting Your Mortgage
Unless you have enough cash on hand to buy a home, you need to secure a mortgage to afford the purchase. However, you should not just apply for a mortgage when you're ready and hope for the best. There are actually some things you should be doing before you're ready to buy, which will help improve your chances of qualifying and getting a good rate.
Credit Score Improvement
Making improvements to your credit score play a big part in if you are approved and what your rate will be. Unfortunately, it can take a while to make those improvements and have the changes reflected on your credit score. You also must look at the credit scores of everyone that will have their name on the mortgage, which means if you are purchasing a home with your spouse, their credit score is considered as well.
If you have existing debts, such as credit card related debt, try to pay these cards off. Start with the cards that have the highest interest rates, and pay off the others next. It can take 30-45 days for that paid off credit card to be reflected on your credit report, so get working on this first.
If you do not have a credit card, it may be time to get one and start building your credit better. Making regular charges, not maxing out your credit card, and paying off the balance in full will demonstrate that you are responsible with credit that is given to you.
Down Payment Saving
While there are loans that require a minimal down payment, there are advantages to saving up a big down payment on the house. The main benefit is that having 20% of the home's value as the down payment results in not having to pay private mortgage insurance. Some kinds of loans do not allow you to stop paying the insurance costs over the life of the loan, while others allow you to remove it when you've paid off 20% of the home.
A large down payment also gives you a higher chance of having the mortgage approved. Saving all that money shows that you are responsible with money management, which makes you a lower risk in the eyes of the lender. It can also result in having a lower interest rate.
For assistance finding a mortgage lender that will work with you and your financial situation, try working with local mortgage brokers.