After finding the perfect house and negotiating to get within your target budget, now you need to secure the best financing possible. MSN has compiled the "10 Tips to Secure the Best Interest Rate on your Mortgage" in a recent article.
The size of your mortgage is critical in determining your mortgage payment, although the mortgage interest rate has a significant impact in calculating the payment amount. The Federal Reserve sets the base rate, but the interest rate you are charge is mostly determined by you and where you stand financially. Here are ten tips from MSN on securing the best interest rate on your new mortgage.
- Make the biggest possible down payment: The larger your down payment, the less money the lender will have to give you, and the lower your interest rate can be. Your interest rate is partially based on your home's loan-to-value (LTV), if this ratio is lower, you might be rewarded with a lower interest rate.
- Make sure your credit is in excellent shape: While no one credit score is needed to buy a house, those with higher credit scores have usually been offered lower interest rates.
- Pay for points: You can pay extra directly to your lender to lower your interest rate. For every one percent of your loan amount you are willing to pay extra, it could amount to as much as half a percent off your interest rate. What this means, you are paying a more significant amount of interest up-front.
- Have a long employment history: Minimal periods of unemployment shows lenders they can count on you to pay your mortgage in full every month. This can help lower your interest rate.
- Prove income stability: Income stability will help show that you won't be likely to miss any mortgage payments.
- Lower your debt-to-income ratio: The lower your debt-to-income ratio, the lower your interest rate will be.
- Build up cash reserves: Proving to your lender that you can still pay your mortgage in the event of a job loss will help you score a lower interest rate.
- Shop around: Finding a lender that suits you best can help ensure you get the best possible interest rate for your financial situation.
- Close on your loan as quickly as possible: If you can close within the 30-day window, you might pay as much as half a percentage point less than those who need 60 days to close.
- Choose between a fixed or adjustable-rate mortgage: While many people might be wary of an adjustable-rate mortgage (ARM), it can be a better option for those who plan to pay off their mortgage in a short amount of time.
For more information on buying a home in Prescott, Arizona, give Tim Anderson with BloomTree Realty a call. He has over 30 years of experience in real estate and will not only be able to find your next home, but he is also an invaluable resource on the home buying process.