Introduction
Buying a home is very exciting and is one of the biggest decisions anyone can make for themselves and their family. There are several ways to fund your new home. One way is to pay cash for it. However, the most popular way to purchase a home is by getting a home loan. One thing to be careful with is the mortgage rate of your home loan. A rate too high can double your payments. There are also a few different kind of mortgage rates. The two most popular ones are a fixed mortgage rate and an adjustable mortgage rate. A fixed rate mortgage is the best way to go because your percentage rate will never increase. The adjustable mortgage rate can increase and catch you off guard if you are stuck on a tight budget. Here are a few tips to help you with getting a better mortgage rate for your home loan.
Step 1
Make sure you have a steady job and have been there for a while. How long you have been at a job will either work for you or against you when a bank is considering what interest rate to give you. If you just changed jobs, it's okay as long as you have been in the same field and the work is consistent on a weekly and monthly basis. Make sure you have pay stubs to show your pay. This will help with the mortgage rate for your home loan.
Step 2
Paying your bills on time every month is a huge deal. When you pay your bills on time, this helps keep your credit scores up. Many banks give you an interest rate on your home loan based on your credit score. If you are paying your bills more than 30 days late then your credit score drops and your interest rate for your mortgage goes up so pay on time always. This shows the bank that they can count on you to receive their payment on time as well and you are lower risk for default.
Step 3
You don't want to have too much debt. Now is not the time to go applying for credit cards, store credit, or a new car. Each time you get further into debt and each time you apply for credit, this too will cause your credit scores to fall. You know what that means; a higher interest rate for your home loan. Keep your debt to income ratio down.
Step 4
Have a down payment saved up for the purchase of your new home. The more money you put down for your mortgage, the lower rate you will have on your home loan. The bank will know that if you are investing your own money then you are less likely to default on your payments because you also have invested your own money.
Step 5
Try to get a home loan through a local credit union. Often times if you have good credit and job history, you can get a better mortgage rate through a credit union. They work with people one on one rather than just a credit score so any slip ups you may have in your credit history, you can explain your situation and this will play a role in your final rate.
Tips
Keep the same job for at least two years before applying for a home loan.
Do not be late paying your bills or your mortgage rate will be higher.
Start saving now for a down payment.
Do not apply for credit for anything else.
Have fun looking for your new home!
Sources and Citations
http://freefrombroke.com/types-mortgage-loans/
