Unlock a lower mortgage rate with these 3 tips
Getting a mortgage is stressful. There are a daunting number of questions that you are asked even to receive a pre-approval from a bank. Then once you get the letter, you might notice that the rate is much higher than the posted rates. You may think it’s just that one lender and fill out another application only to find that one gives you around the same APR. When you receive a higher rate than you expected, there is usually an underlying issue with your application. All hope is not lost, however. You can get the mortgage that you deserve.
Put More Money Down
The lender’s risk is at its highest when the requested mortgage amount to home value is at its highest. If you are seeking a mortgage with a down payment in the range of 0% to 19%, you may find that banks quote you a higher interest rate. Anything often helps. If you can’t stretch your down payment, consider purchasing a cheaper property.
If you want to buy a $200,000 real estate in Maadi but only have $20,000, see if there’s anything you can get for $100,000. Even if it’s not the property you want, your savings on interest will let you accumulate equity much faster. In turn, this will allow you to get the property you do want much more cheaply in the future. You want to be aiming for at least 10% down with 20% being the most ideal. You will avoid paying PMI (private mortgage insurance) if you put at least 20% down.
Clean Up Your Credit Report
Sometimes loan terms are unfavorable due to a bad credit report. Consider pulling your score and looking at it. Many credit card sites will now let you view your report for free. Look for any red flags it produces. In particular, having too high of a revolving credit balance can be a big red flag for lenders. Balances carried on credit cards can have a detrimental impact on getting a mortgage. If you find that you are using too much of your available credit, consider paying down some debts. You could consider getting a personal loan to shift those debts from revolving ones to a single installment plan.
Many people are unaware that doing a debt consolidation like that can have a positive impact on their score. You may see an initial dip as the new account results in a hard pull and a lower account average age. Eventually, the score will go back up as you pay down the consolidated loan. Once it does increase again, your quoted mortgage rates will go down significantly.
Consider Alternative Income Sources
When applying for a mortgage, lenders will ask about your income. Many people put down their salary and leave it at that. Bonuses, overtime pay, stock awards, alimony, child support, rental income, and other sources of money also count toward your income that a bank can consider for repayment of the loan. A higher gross income is less risky to banks and is, therefore, typically a lower rate. When applying, ensure that you consider all sources before putting down a final amount for your sources of money.
The mortgage process always has some level of stress. You needn’t add to that stress by trying to figure out how to get the interest rate you deserve for your dream house. If you’re finding banks unwilling to give you top rates, make sure that you have enough down, you don’t have any issues with your credit report, and that you thoroughly include all income on your application. If you get each of these parts right, your mortgage application process will be a breeze!