Taking out a mortgage is a major financial decision. While buying a home can be exciting, there's more to consider than finding a property in a desirable area that suits your needs. Your mortgage is something that you will be paying down for years. It's important to note that all mortgages are not created equal. Different lenders mean different interest rates and fees. Shopping around can mean fewer fees and lower interest rates, thus saving you thousands of dollars in the long run. Here are three tips for finding the best deal on a mortgage.
Build Your Credit
If you are looking for the best deal possible on a mortgage, one of the best things that you can do is build up your credit. Your credit score has a major impact on the interest rate you qualify for. The higher your credit score, the lower your interest rate. If you have some time before you plan on buying, you can raise your score significantly. Paying down debt and also paying your bills on time will help your score go up quickly. If you are looking for a quick improvement, checking your credit report for errors can help. Finding errors and having them removed can improved your score in very little time.
Have a Larger Down Payment
Another way to get a favorable mortgage rate is by bringing a larger down payment to the table. Saving up a larger down payment shows lenders that you are serious about home ownership. Most lenders require a down payment between 5 and 15 percent. Having a down payment of 20 percent or more can mean a lower interest rate. It also has the added benefit of helping you avoid private mortgage insurance, or PMI, which can add to your monthly bills.
Use A Mortgage Broker
While shopping around and looking at various lenders is the best way to get the best deal on your mortgage, it can be difficult to do by yourself. This is where mortgage brokers can come in handy. A mortgage broker applies for loans with multiple lenders on your behalf in order to find the loan that's right for you. Essentially mortgage brokers act as a middle man between you and a variety of lenders. They are also paid either through the lender or the borrower depending on the situation. On average, their fees are between 3 and 5 percent of the value of the loan.
If you are buying a home, looking for the best deal on your mortgage can save you thousands. Building your credit and bringing in a larger down payment can help you qualify for a more favorable interest rate and help you save. Hiring a mortgage broker will also help to ensure that you find the best deal on your mortgage.