Buying a home could be one of the biggest investments you ever make, and mortgages are a financial obligation that will follow homeowners for 20 years or longer. That is why it is so important to spend some time researching how mortgage rates work and what can be done to lower them. If you plan on purchasing a home within the next few years, then take a look at these four ways you can get the best mortgage rates from the top lenders.
Start Monitoring Your Credit Score
Many people make the mistake of believing that they have good credit simply because they pay their bills every month. Even with a great job and consistent credit history, your credit score might not be as high as you think. When it comes time to apply for a mortgage, you will have much higher rates if your credit score is not ideal. At the very least, you should try to take a fresh look at your credit score every two or three months to make sure that it is slowly climbing and there are no anomalies.
Tackle Your Current Debt
It might be tempting to start saving for a down payment right away, but you will probably save more money in the long run if you start taking care of your current debt. Every piece of debt that is in your name will lower your credit score, and lenders want to see as few open accounts as possible when they look at your credit history.
Work on a Strong Down Payment
Everyone has different financial circumstances, and that means there is no single number that you should aim for when you are saving for a down payment. In the past, most lenders recommended covering at least 20 percent of the total cost of the home. While that is an excellent down payment, it is not always realistic. Some lenders will accept down payments as small as three percent, but your mortgage rates will most likely be unmanageable if you cannot put down at least 10 percent.
Lending companies typically only approve mortgages for those who have a stable financial history. Even if you have recently moved to a new company for more pay, they might be nervous that you are not a consistent employee. Those who change jobs or companies multiple times a decade might have a very tough time getting a home loan unless they are able to put quite a bit down. If you have recently been looking for new jobs outside of your company, then you might want to consider postponing the move until you have been approved for a loan. You may be able to find more resources and insights at the WFCU Credit Union website.