Buying a home is one of the most exciting experiences in life, but it can also be the costliest. Unless you have a pool of money, you will require to get a mortgage to help you finance the purchase of your dream home.
However, securing a mortgage can be overwhelming, especially when applying for the first time. Fortunately, there are ways to improve your odds of getting the best interest rate and terms on a mortgage. Here are some tips on how to get the best deal on a mortgage.
Get quotes from 3-5 lenders
Another way to ensure you get the Best Mortgage Rates BC is to apply with 3-5 lenders and see which offers the lowest rate. It pays to shop around, so don’t accept the first rate you are quoted.
Each lender should give you a loan estimate and a three-page standardized document showing the loan’s interest rate and closing costs. The document should also have other key information, such as how much the loan will cost you in the first five years.
Improve your credit score
Improving your credit score is one of the best ways to get a lower mortgage rate. While a bad interest rate won’t automatically bar you from securing a home loan, it can make a difference between getting the lowest possible rate and being hit with more expensive terms.
A higher credit score could appear as an assurance you are more likely to pay your debt on time, so lenders are likely to be more comfortable offering your better rate and terms. There are various ways to improve your credit score, but the easiest is checking your credit report regularly and ensuring you fix any errors.
Know your debt-to-income ratio
The debt-to-income ratio, also known as DTI, compares how much money you owe every month and how much you earn. Generally, it’s the percentage of your gross monthly income before taxes that makes for mortgage, rent, utility bills, credit card payments and other debt.
The lower your debt-to-income ratio, the more attractive you appear to loan providers. A low DTI means you have higher chances of being offered a low-interest rate and excellent terms on your home loan. Earning extra income to repay your debt and cutting down your expenses are ways to reduce your DTI.
Save for a down payment
Making a bigger down payment can help you get a lower mortgage rate since the lender considers you a less-risk borrower than when you make a small down payment. For instance, making a down payment of 20% to 30% could lower your mortgage interest rate by up to 0.5%.
Lenders accept lower down payment, of course, but less than 20% usually means you will have to pay private mortgage insurance (PMI). Saving for a larger down payment can help you avoid PMI completely.
Endnote
Buying a home is an expensive endeavour, but getting the best deal on a mortgage can help ease the overall homebuying process. Be sure to take the time to carefully evaluate your options and only focus on what you can control. Most importantly, make sure you buy a home you can afford by creating and sticking to your budget.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
