After riding a swift updraft earlier in the year, mortgage rates have steadied out at around 4.5 percent for a 30-year fixed loan. There is a chance however that they’ll resume their upward path, which is one of a number of things borrowers need to know now to get the best loan. Given the changing mortgage landscape, here are five things borrowers can do to get the best deal;
1. Do your homework
Check your credit report with three credit reporting agencies that way if there are errors you can correct them then take the necessary steps to improve your credit rating by paying down debt. Avoid borrowing to buy a car or other big-ticket item in the months before you apply for a mortgage. Be ready to offer a lot of documentation as to your income, debts and assets. Then shop around amoung several lenders for the best rate.
2. Get pre approved
This will make you a stronger buyer because the sellers will know you have the financing in place to move forward toward your home purchase. Getting pre approved also sets boundaries around what you can afford, which dictates what your price range is.
3. Choose between rates
The standard loan offers a fixed interest rate for 30 years. Adjustable-rate mortgages (ARMs) offer a fixed rate for, typically, the first five or seven years after which the rates increase every year. “Forget about adjustable rates altogether unless you have sufficient financial stability that you could absorb a higher monthly payment,” said Greg McBride, an analyst with Bankrate.com.
4. Decide length of loan
Fifteen-year loans are more popular with refinancing homeowners than they are with first-time home buyers because many buyers can’t afford the higher monthly payments. The reward for the higher payment is that over time, you’ll pay less in interest by shortening the life of the loan. Fifteen year mortgages come with lower rates too.
5. Lock in your rate
Once you’ve found a good rate, lock it in. This usually doesn’t cost anything, but if you do pay a fee it is refunded at closing. It’s not worth betting rates will fall before you close on the house.
Article taken from Florida Realtors. Please visit their website for more information and to read this article in its entirety.
Morris Hagerman is a local real estate agent with Real Estate One in Royal Oak, Michigan. He serves Berkley and the other Woodward 5 communities, including Ferndale, Pleasant Ridge, Royal Oak and Huntington Woods. Hagerman is also a member of the Berkley/Huntington Woods Area Chamber of Commerce. You can contact him by phone at 248-854-8440, email at morrishagermanproperties@gmail.com or visit his web page.
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