For anyone who is considering or already in the process of home buying, you already know there are a number of things to deal with and get through in order to get the home you want while paying the price you find acceptable. One aspect of home buying that can be quite a tricky hassle is getting through the mortgage process. These simple suggestions can help you get through all of the a little bit easy and can help you get a better rate. Often, this is one of the very first steps towards getting that rental property- so, before you flip it, before you rent it, you’ve got to get it. Mortgage tips to help you do just that are everywhere, but here are 5 of the most tried and true ones to get you started.
Make ready that credit score!
Having your credit report ready and up to par is one of the best ways to ensure you get a decent rate on a mortgage. Even the slightest few points can make a huge difference. One way to get your credit score in order is to get a report roughly 6 months before applying for any loans. This way you have time to get in touch with the agency and fix any discrepancies as well as making sure you avoid any purchases or credit applications that may poorly effect your scores.
Improve Debt-to-Income Ratio.
This is as forward as it sounds, either decrease the amount of debt you have incurred or increase the amount of income in your home. Paying off those last few big credit card payments or taking a large chunk off of your student loan is a good way to decrease the debt ratio and make help make you look more desirable to lenders.
Bigger Down Payment, Bigger Save.
The amount you can put on a down payment also has a good amount to do with your mortgage rates. Making the choice to save up for a bigger down payment can be one of the smartest decisions you can make. Not only does it give you the advantage of smaller interest rates on bigger loans, there are usually very nice deals on closing fees involved as well. Remember that most lending programs require a down payment between 5% to 20%, and that if you cannot afford the 20% down payment then you must have lending insurance for their safety.
Considering a Hybrid Mortgage.
While most people would think that the usual 15- to 30-year fixed rate mortgage is best for them, it’s not always so. There are some who go into buying a home knowing that they will be selling in the next 5-10 years. In these cases, a hybrid mortgage is the best way to go. These allow you a lower interest rates for the time period. For example, if your plan to sell after just 4 years then you can choose a hybrid mortgage at 1% less interest rate for 5 years. However, if you stay in the home for longer than expected, you could be seeing a higher spike in rates.
Locking Your Interest Rate.
Now it’s time for the commitment. Once you have your application thoroughly filled out and you’re all ready to go, now it’s time to decide whether to lock in your interest rate immediately or not. You have the choice, if the rate seems pleasant enough to you, to lock it in at the time of the application process. However you also have the choice to wait until the deal is closed and let the rate float with the market. While this could give you the advantage of getting a lower rate than you had expected, it could also do the opposite and stick you in a higher rate than your first.