Purchasing a new home is an exciting time. You should do your homework as you plan to make your move so you can set yourself up to receive the best financing for your situation! You’ve probably thought about your must-haves, the ideal location, and all of the joy that comes with settling into your new space. The less exciting aspect you must think about is financing your new home. Here are a few tips to help get you started on finding the best mortgage rates for your new home:
Optimize Your Credit Score
One of the key factors in getting the best mortgage rate will be your credit score. The higher the score, the more attractive you are to potential lenders giving you more options and lower rates. How can you improve your credit score?
First, you should have an idea of what it is and what it means to lenders. There are many options for checking your credit score. Companies like Credit Karma, can give you an idea of what your score is and the factors that are helping to determine it. You can also get a free credit report from www.annualcreditreport.com
According to Experian, a score above 700 is generally considered to be good. If you fall in the 800 and above range, you have exceptional credit. Scores that range between 670 and 739 are good, while scores ranging from 580-669 are considered fair.
Scores below 580 are generally accepted as being poor and may limit your financing options. If your score does not fall into one of the optimal ranges, that doesn’t mean that all hope is lost. With a little work and know-how, you can raise your credit score in a relatively short time period.
What Determines Your Credit Score?
The factors that affect credit score are payment history, the amount owed, new credit, length of credit history, and your credit mix. Fico calculates your score by putting the majority of the weight on payment history and amount owed.
If you have a less than perfect payment history, you will want to correct that moving forward. Scheduling monthly payments through an auto-pay system is an easy way to make sure you don’t miss or send a payment late while you are trying to maximize your credit score.
If you have a large amount of debt compared to the amount of available credit you have, in other words, if much of your credit is maxed out or near its limits, your score will be negatively affected. You can improve your score by paying down your balances or increasing your available credit. There are many resources available offering advice and strategies for improving your score. Getting smaller credit-builder loans or increased available credit on credit cards can make a major difference to your credit score!
Secure Your Down Payment
There are varying down payment options available depending on what you qualify for. Some loans may only require you to put 3.5% down, while others will require 20%. Typically, the more down payment you are able to provide, the better the rate you will be offered.
If you have the cash available to put more money down, you should consider doing so to get the best rates and lowest monthly payments. If less than 20% is put down, usually lenders will require you to buy private mortgage insurance (PMI) which will be added to your monthly payment. Keep that in mind, when discussing costs with potential lenders.
Shop Multiple Lenders
Not every lender will offer you the same financing options and mortgage rates. Talk to several lenders before choosing the one that is right for you. According to the Federal Trade Commission, you should shop for a mortgage just as you would for a car. Financing is available through banks, credit unions, brokerages, and builders themselves.
Compare incentives, rates, points, fees, and PMI to get the best offers available. Once you know what is available, you can negotiate the best deal. Ask the lender to write down all costs associated with the loan and then ask for reduced or waived fees or fewer points. Once you have agreed on terms, ask for a lock-in to keep the rate from increasing later on.
At Rockford Homes, the preferred lender is Partners United Financial. Financing a new-build is different than a typical mortgage, so Rockford Homes partnered with Partners United so customers can have easy access to the experts! This partnership allows mortgage bankers to pair you with a mortgage offering favorable terms and low rates customized to fit your budget and personal situation.
Consider a 15 Year Fixed-Rate
If you are able to do so, consider a 15-year fixed-rate mortgage over the standard 30-year. While your monthly payments will be higher, the interest saved will be substantial. You will also have the luxury of having your home paid off in half the time.
Do Your Homework!
Before you walk into a lender and ask for their best rates, do a little research on types of loans that may be available to you. Get an idea of what current interest rates are and be prepared for the terminology used when discussing your loan options. The Federal Trade Commission provides a helpful glossary of terms if you have questions. With a good understanding of what lenders are looking for and what they are able to provide, you will be well-prepared for receiving the best financing available to you for your new home.