Unless you have the finances to buy a home outright, you will most likely need to get a mortgage first. You have options when it comes to this. There are many lenders willing to provide you with the money you need. However, not all of them will have a rate that suits your budget. You will need to shop around first before you find one.
Mortgage lenders from Utah cite the following ways to improve your chances of getting a good value rate.
Show a Strong Employment Record
Lenders are taking a chance on whoever they lend money to. They want to get a return on investment each time they do so. Make a good impression by showing your strong record of employment. This shows them you are financially stable and have a constant cash flow. This then assures them that you will pay on time and have a low chance of defaulting. Prepare pay stubs or slips and forms provided by your employer. Self-employed individuals and those who have several part-time jobs may have a difficult time getting an approved mortgage.
Pay a Large Down Payment
Lenders will provide a better mortgage rate if you pay a huge down payment. The ideal amount is 20%; if you fall below that, you might have to get private mortgage insurance that will increase the overall amount. Before purchasing a home, save as much as possible for the down payment so that you can pay 20% or even bigger. The bigger the amount, the less you have to pay throughout the loan term and you get an affordable interest rate.
Consider a 15-Year Mortgage
Lenders prefer faster returns on their loans, so they are willing to offer a better rate for shorter terms. For a 15-year term, for example, you will need to pay more upfront and monthly, but you will pay the loan faster at a lower interest rate. So, you will end up saving more money in the long run. However, this will depend on your needs and future plans. You might want to move again even before you pay the whole mortgage.
Improve Your Credit Score
One of the determining factors of getting a mortgage is your credit score. A poor rating is a red flag to lenders because it means you are unable to fulfill your financial obligations. You have a high likelihood of default and late payments. Before you get a mortgage, improve your score first. Maintain a healthy account balance, always pay your bills on time, and maybe make a few small investments. Also, avoid getting new credit cards before you buy a house.
Review the Additional Fees
There are costs of a mortgage that you cannot remove or negotiate. However, some lenders add even more fees that will cost you more overall. These may include broker rebates, application fees, loan processing fees, underwriting fees, and mortgage rate-lock fees.
If you are looking to get a mortgage, these are some of the ways to improve your chances of getting one at an affordable interest rate. Compare the rates offered by different lenders to determine which one you can afford.