There are a variety of ways you can capitalize on the best mortgage rates on the market. It’s best to acquire good mortgage rates when you purchase your home, rather than having to rely on refinancing. Here, we’ll go over a few tips that can help you get the best mortgage rates possible.
1. Pay off your debts. The majority of homeowners will focus heavily on saving money for their down payment. While this is a good notion, it’s important to remember that it’s actually more important to pay off credit card debts than it is to pay a large down payment. Why is this? First of all, credit card debt is hugely expensive. The national average interest for credit cards is currently at around 13%. This is more than double the 5.21% domestic average for a 30 year mortgage with a fixed rate. Secondly, large credit card debt will prevent you from being able to borrow money. Creditors just simply won’t permit your total monthly debt to exceed 40% of your gross income.
2. Consider a piggybacked loan. Many first time homeowners can’t afford to make a large down payment on their home. If you purchase a home with a low down payment, you could be hit with costly things such as private mortgage insurance and a higher interest rate. A piggybacked loan is when you take out two mortgages to prevent skyrocketing interest rates.
3. Consolidate your finances so that you can make a significant down payment. A difficult economy can bewilder many home-buyers. It’s often difficult to commit to making a large down payment, especially when you have a lot of other expenses. But you’ll find that maximizing your down payment will save you money in the long run.
4. Calculate just how much you can afford. You need to analyze two factors when calculating this. The first factor is how much you can borrow. The second factor is how much you can raise to pay your down payment. One great rule of thumb is to make sure that your homeowner’s insurance, taxes, and annual mortgage payment doesn’t surpass 25% of your gross income. Use this number to figure out how much liquid cash you can spend on your down payment. Be sure to remember that you’ll need to pay closing costs. These closing costs can cost as much as 5% of the value of your home.
5. Perform a home inspection before you buy. It’s crucial that you completely assess the plumbing, heating, electrics, air conditioning, roof, and other home structures before you buy the home. There are specialized people out there who work as home inspectors. Hire a home inspector and do some sleuthing yourself. You’ll save yourself a lot of time and money if you make sure everything is working properly before you purchase the home.
Remember, you should always shop around when you’re looking for mortgage rates. Utilize good attributes such as strong credit or a large down payment. There are a lot of ways to find great mortgage rates. It’s important to be diligent and meticulous when you are analyzing loans. After all, your home will very likely become your biggest investment.