3 Tips for Getting a Great Interest Rate on Your Mortgage

21 Jul

Buying a house can be a complicated process if you do not know what you are doing. There are many pieces that go together. Getting a mortgage is one of those pieces and it is easy to understand by breaking it down to really understand the process.

The first basic part of getting a mortgage is understanding that there are three types of mortgages. Fixed-interest mortgage is when your interest rate is the same for the life of the loan and you have equal monthly payments for the duration of the loan. Adjustable-rate mortgage is when your interest rate changes every year. Interest-only loan is when an individual needs a rock bottom payment for many years allowing you to simply pay the interest payment. Once you determine which of the three mortgages best suits your situation, you need to determine how much you are able to afford. How much of a down payment have you saved for a home? What is your credit score? It is important to think about how much a bank is reasonably going to lend you based on the down payment and your credit score. Also, keep in mind your income, debt, and other costs associated with the home such as taxes, insurance and utilities. You want to make sure you can comfortably afford what you decide to purchase. Your mortgage company will use loan origination system to figure out your rates.

The second basic part of getting a mortgage is knowing how to shop for one and how to deal with the various players involved including lenders and loan brokers. Know if you are a shopper, what features you are looking for, your market niche, your price selection strategy, how to solicit price quotes, how to select the right loan provider, how to lock your price and how to cover your rear. A tip for selecting the right lender is to go to your current bank and ask what mortgage deals they are offering their customers. Also, ask friends, family members and associates for referrals. You deserve to be treated right with such a big financial purchase so don’t take who you ultimate work with lightly. Take your time and do your research.

The third basic part of getting a mortgage is understanding what is involved in finalizing the deal. Understand that this process requires a lot of paperwork. The initial application requires information about you, employment information, and information about the house you are looking to purchase. Documentation of your earnings, monthly expenses and debts will be needed to help a lender gauge your ability to repay the mortgage and if you are a good investment for them. Lenders will also look at your credit score to see how good you are about making timely payments. Your maximum loan amount will be based on the value of the property and your financial condition. It is typical for a loan application to take 30 days to be processed and the lender to make a decision.