Getting the Best Mortgage Rates

Friday, October 23, 2009

Home loans or mortgages, like any other type of loans, will have hidden or incidental charges on top of the monthly installment and interest rate out of desperation and necessity, most homeowners take out a mortgage on impulse without considering the consequences. Low interest rates are not the end all and be all when considering a mortgage policy. You do not want to end up regretting your decision because actually your mortgage ended up robbing you of potential savings. Here are some tips to take into consideration when planning on taking out a mortgage on your home:

Shop or canvass around

Compare rates and incidental charges from every and all lending institutions you can find. Do not limit yourselves with the banks or with banks per se. In fact, most banks have the worst interest rates. Ask advice from brokers, they are the ones who earn their livings with these kinds of transactions. They will know who among the other financial institutions will offer the best rates.

When you are equipped with all these knowledge, you can better decide to which institution to apply a real estate mortgage with. You also protect yourself from surprises because you can manage your money better when you know exactly how much to pay on a monthly basis. Imagine yourself expecting only to pay the monthly installment plus the interest rate only to find out that there are a hundred or so incidental charges added to your monthly rate? The worst case is that you will default on payment and will have a hard time coping up with the default which would result to a foreclosure proceeding against you.

Go for gold or an A+

That is when it comes to your credit score. A bad credit score will be known to all financial institution as they do conduct credit investigations before agreeing to lend out money, even if secured by a home as a collateral. How do you keep a good credit score? Pay all your bills on time and keep your credit balance to a minimum and by minimum means to keep it below half of your credit limit. Bad credit score means higher rates for you, because the lender will want to install safety measures just in case you default on your payments. As they say, first impressions last. So before signing up for a mortgage, impress your lender with a good credit score.

Think of a mortgage as another bill to pay

With another bill to worry about, who would think of burdening themselves with yet another? Meaning, as tempted as you may be, do not apply for another credit card. Although it initially increases your credit limit, in turn lowering your credit balance percentage, it actually hurts your credit score. So keep to the current ones, or at best, maintain a single account by paying off all the others and closing them.

Bigger down payment, smaller rates

Most lending institutions require the payment of a down payment. The rates range from five percent to twenty percent of the total purchase price of your home. So even if the lender requires a small percentage, offer as high as you can because it will translate to lower rates to be charged against you.

These may be hard and meticulous steps at first, but will be more than worth it in the long run. Hey, if it means saving your home right?

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