Finding the best home loan for your family’s newest buying opportunity can seem daunting. This is especially true for first-time buyers who are entering the marketplace with little to no experience in hunting for the perfect home and mortgage combination that will facilitate the perfect move. Borrowers must square these two different realms in order to complete the purchase of a new home, but making your home loan work for you doesn’t have to be daunting.
In fact, searching for information on mortgage rates and lenders has become one of the simplest tasks that borrowers must complete as they begin to prepare for their down payment and mortgage applications. With this guide, you can rest easy: Preparing for a home buying opportunity is all about collecting and leveraging information, and the steps below provide exactly that.
Begin with your credit score for maximum opportunity.
The first thing that any borrower should do is evaluate their own credit score. Before applying for a mortgage loan, you’ll want to conduct a kind of self-audit to understand what your current financial picture shows to prospective lenders. The credit score acts as a guide for leaders looking to understand the fiscal responsibility and track record of any borrower that approaches the firm for a loan or line of credit. Simply put, this metric is one of the most important factors in a lending decision because it shows banks and private equity lenders’ information that can help them evaluate the probability of on-time repayment throughout the life of the loan.
Excellent credit is always preferred, but wherever your credit rating falls on the spectrum, there are options available to you for borrowing to begin building home equity. For those with excellent credit, a smaller down payment may be an option, while others will need to build up the traditional 20%. Understanding where your personal credit history falls is crucial to making long-term financial decisions that will impact you and your family for decades to come.
For those with less than stellar credit, paying down debts and saving regularly for the twelve to eighteen months before approaching lenders for a home loan can provide the required edge for securing great mortgage rates.
Approach your bank for information on their loan products.
Home loans are complex financial products, and lending institutions are always willing to provide details on the services, terms, and interest rates that they typically offer along with funding for a home or other borrowing need. Your bank or credit union can even advise you about eligibility for a VA loan, a Native American direct loan, or another area-specific lending program (perhaps through the Federal Housing Administration). The process of finding the perfect home loan takes a lot of research and patience, and the search (after your credit building period) for the right product should always begin with your own bank.
Shop around through private lenders and other banks in your area.
After finding information on your own bank’s offerings, it’s important to shop around in order to understand the total landscape available to you. A 1% reduction in the mortgage rates can translate into tens of thousands of dollars in savings, so shopping around is a crucial step in order to find the financial assistance that gives you the biggest long-term advantage.
Comparing rates is a simple process, but it’s often one that borrowers forget to do before signing on for a twenty or thirty-year repayment term with their local bank. This may be the best rate available to you, but you won’t know unless you do some digging and investigate other offers.
Make sure you start the process early by boosting your credit score and then shop around for the best combination of monthly payments and mortgage rates to secure your financial future.