Now is a good time to buy a home in the United States. The average mortgage rates in 2016 were around 3.5 percent, an all-time low. By comparison, mortgage rates exceeded 15 percent in the 1990s and hovered around 8 percent throughout the 2000s. The housing market has recovered from the difficulties of the recent recession; in other words, it is a buyer’s market. As a future homeowner, you can take even more steps to ensuring your rates are as favorable as possible. This requires planning far in advance of signing, however, so we provide steps you can start taking now to strengthen your position at the negotiating table.
Before the house hunt
Work on getting a good credit score.
- Most buyers should have a score of at least 600, but getting it up to around the 750s can make you look good to loan providers and can ultimately knock some percentage points off your mortgage rate.
Have a consistent income
- Having a current, steady job makes you look good for loan providers so years at the same job is ideal. Also, they like to look at your work history to see if it is consistent and that there are no long gaps in employment. This is something to keep in mind if you are on a job hunt.
Get your Debt-to-Income ratio as low as possible.
- DTI is your monthly bills you have to pay divided by your monthly income. Ideal DTIs to loan providers are less than 33% so getting it as low as possible will help you get a favorable mortgage rate.
The hunt is on…
Research the different institutions and their rates
- Between national and regional banks, credit unions and direct lenders, there are so many different options to look into. Some have better rates depending on your situation, so don’t settle. Shop around!
- You never know if you qualify for lower rates until you find out. These can include FHA financing or Veteran’s loans. It’s always good to have a home loan consultant who is an expert and can walk you through everything you need to know.https://www.libertylendingconsultants.com/the-loan-process/
Consider providing a larger down payment
- You can pay down payments at 10% or 30% or anywhere in between, but the higher you pay now, the better it is down the road. Many experts agree that an initial down payment of at least 20% can ensure a good mortgage and interest rate.
Pay out the closing costs, yourself
- Every mortgage agreement has closing costs that most buyers are unaware that they can pay themselves rather than the lender. This might ensure that you have a better interest rate in the long-term.
Have a Mortgage broker on your side
- Having someone on your side can be the difference between having a good rate or a bad one. Find mortgage specialists who can help guide you through the process and you can have the best mortgage rate available.
Everything that comes before and during the house hunt is daunting, but it doesn’t have to be. If you are smart and keep all of these things in mind, soon enough, the rewards will outweigh any of the penny-pinching you have done. A lower mortgage rate means more monthly income to spend on things that really matter. Get out there and let the hunt begin!