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REFINANCE YOUR HOME WITH A GOOD RATE
HOW TO GET A GOOD MORTGAGE?
When purchasing a home one of the most overlooked aspects is getting a good mortgage. The difference between a good and bad interest rate could save a person hundreds of dollars per month or give them tens of thousands of dollars of extra affordability. With interest rates near all time lows, now is an excellent time to lock in a low interest rate through either a new mortgage or a mortgage refinance. However, due to the recent high rate of mortgage defaults, many mortgage lenders are hesitant to give out new mortgages and getting the best rates are even harder to come by. One of the best ways to get a good mortgage is by visiting the team at Rate Marketplace. After that, you should keep the following steps in mind:
1.) Good Credit Is Helpful For Mortgages
Having good credit would be the first thing a consumer could do in order to get a good mortgage, and a lower rate. One of the biggest determining factors a lender uses today, when deciding to approve a loan application or not, is the borrower's credit profile. After the mortgage "crash" in 2009, lenders have become reluctant to offer home loans to those with less than good credit. An individual's overall credit profile presents the lender with a good idea as to the ability of the borrower to make timely payments, not incur more debt than they can handle, know how long the applicant's credit history is, what type of credit they use, and if the are currently applying for additional credit. They say "history repeats itself", and as far as lenders go, this is true for borrowers as well. By using credit "history", a bank or lender, can determine the probability of a borrower paying their mortgage on time, and in full.
As you can see to the left, credit is divided into 5 main components: payment history, amount owed, length of history, amount of new credit applied for, and type of credit. The various percentages are broke down for you. A person needs to check, and update, their credit report twice a year. Before applying for a new home loan, it is suggested that applicants have negative and inaccurate information removed from their report a couple months before their application. As can be seen from the chart, the easiest way to obtain good credit would be to pay your bills on time. Next, would be paying off your credit card balances, but do not cancel the card, the ratio of amount owed to limit is the deciding factor. Then, do not apply for new credit during the months leading up to you applying for your new mortgage. A credit score of 720 or above would most likely get a person the best rate for a home loan. A score below about 660 would make it difficult for any type of mortgage other than an FHA loan. The best way to get your credit score is by visiting AnnualCreditReport.com.
2.) Make A Bigger Down Payment
Next to a person's credit profile, the amount of down payment is the second most important factor in determining a borrower's creditworthiness. It stands to reason, the more an applicant is willing to put down on a home loan, the better the likelihood that the loan will be approved. In the past, it was possible to get a "no down payment" home loan. But, that scenario is unlikely today with the recent plummet in home values. Now-a-days, a minimum down payment of 10% is generally acceptable. But, that will not be rewarded with the best rates. No, a down payment of 20% or more is required to get the best financing and a good mortgage. Additionally, any down payment of less than 20% requires PMI (private mortgage insurance).
3.) Buy a More Affordable Home
Buying a less expensive house is another way to get a good mortgage. According to the 28 / 36 rule, applicants can borrow or spend up to 28% of their gross monthly income towards their home mortgage's principal, interest, taxes, and insurance (PITI). They may spend up to 36% of their pay on all debts combined per month. Clearly, if a borrower applies for a loan that would require a monthly payment less than 28% of their gross monthly income, they would receive a better interest rate, the lower the ratio, the better the mortgage will be. Lenders call this the "home affordability" factor.
4.) Negotiate, Negotiate, Negotiate
Another way a borrower can get a better mortgage is to negotiate with the bank, lender, or mortgage company. Most lenders will surely want someone's business if the applicant has a good credit history, is willing to put down a high percentage of the purchase price (LTV), and is buying a home that is easily within the price range of the borrower. If this is the situation, a borrower should ask for a better mortgage rate, and to pay less fees than would otherwise be the case.
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