So you've decided it's time to buy your dream home. You are tired of paying rent to your landlord and want a home to call your own. For many, a home is the largest purchase ever made in their lifetime. So how can you make sure you get the best mortgage rate? Research and preparation should be your first steps.
Check your credit score
Your credit score can make a big difference in the rate you receive for your mortgage. Before applying for a mortgage, you want to work to make sure your credit score is the best. Clean up your credit and pay down some credit cards if you need to. The standard minimum credit score required to qualify for most conventional mortgages is 620. However, you may be able to qualify for an FHA mortgage with a score as low as 500. Keep in mind that generally, a higher credit score equals a lower interest rate.
Shop around for the best rates
All lenders are not the same. You will need to shop around to find the best rate. A mortgage broker can help with this. If you use a mortgage broker, they will work with you to find a mortgage. They apply for the mortgage and negotiate on your behalf with several lenders until they find the best interest rate. You can do this yourself, but it will take a lot of time and can be a complicated process. Why not let a mortgage broker do the legwork for you? You can also check with your personal bank or credit union.
Have enough money saved
Banks want to see that you have enough cash reserves. You will need money for a down payment and closing cost. This amount can range anywhere from 1% to 20% or more of the purchase price. In addition, lenders also want to see that you have some additional money in the bank. The standard is two months of mortgage payments in reserve. Lenders take your cash reserves into consideration when setting your interest rate. Having some savings will also give you peace of mind because you are covered in case of any emergency repairs needed in the home.
The interest rate you receive can make a big difference in the price you pay for your home over the years. A difference of as little as 0.5% can save you thousands of dollars. If you have a great credit score, shop around for the best rates with a mortgage broker, and have enough money saved, you are well on your way to getting the best mortgage rate possible for your dream home. For more information, contact your local mortgage broker services.