Watch Related Videos
comments
No one wants to pay high interest rates on anything. High interest rates mean that the lender is getting back his money two or three times over for one product. Unfortunately, this is the cost of doing business in a credit world. When it comes to your mortgage interest rate, you will be paying for it longer than you will for most things that you buy. Here are a few tips to find the best mortgage rate:
Shop around. It's a fact that if you do the work, you'll reap the benefits. Don't just go to your friendly hometown bank because you have a checking account there. Banks are looking out for their own interests and may offer you a loan that is not in your best interest. Look for other options before deciding on a loan for your home.
Work with a mortgage broker. A mortgage broker is working for you. As their client, they are looking at all the loans available to find the one that is the best fit for you. Based on the information that you have provided, they get a picture of the person buying the home and can offer you what you need.
Don't borrow more money than you need. Lenders are well-known for saying things like "According to your income-to-debt ratio, you can buy a $150,000 home." Well, if you only make $35,000 a year, that's probably not going to fit within your budget unless you find a higher-paying job. Getting sucked into purchasing a home that you can only afford on paper is a no-no. It can ruin your credit and you could lose your home.
Don't settle for the 'party line.' This occurs when a lender you're working with only gives you one option. Even for the person with a terrible credit history, there is usually more than one option. It is also a red flag when that only option is the one that is endorsed by a certain bank or mortgage company. Your mortgage professional should be looking out for your best interests, not his or her own. Choose another mortgage professional if you run into this situation.
Use a credit union. Credit unions are somewhat different from banks. While they are both financial institutions, they don't operate in exactly the same manner. A bank has a group of investors that they are loyal to. These people vote for policy not the customers. At a credit union, the owners are the members. Credit unions are mostly not for profit and can offer their services at a lower cost to the members. Mortgage loans can be offered at lower interest rates for new homeowners.
Examine your credit report. Each person is entitled under the law to obtain a free credit report from each of the three reporting bureaus each year. The credit report should be checked for errors as well as the score. Low scores mean that mortgage interest rates will be higher than for conventional borrowers with better credit. Get financial advice on ways to improve your credit score. The answer may not always be to pay off all debt. There could be other solutions that suit lenders just as well. It's an industry fact that improving your credit score will improve your chances of qualifying for a better interest rate.
