To avoid the worst possible scenario and to secure you the perfect mortgage rate, let’s go over the list of things that will make or break your mortgage rate. First, what should be avoided at all costs. Second, in order to keep your mortgage rate as low as possible.
While a no-brainer, owing any sort of debt will look poorly to an inspector. Credit checks are much more sophisticated than a decade or even a year ago. Our advice is to grab your credit check now (you get two free reports each year). Also, lenders look for not only reliable credit, but a reliable source of income. Most will look for two years, at a minimum. If you’re self-employed or Federally employed, they might even look for more. Rule of thumb, have enough assets up front to be able to afford 2 months of your mortgage.
If you’ve listed your property, whether with a Realtor or a Multiple Listing Server, you might give Lenders the wrong idea. Look at it from the lender’s perspective: If you’re not invested in your home, they might not allow you to refinance or instigate a brand-new mortgage. Keep your home history clean by about six months before applying for a mortgage or refinancing your terms.
Know Your Figures Beforehand
Lenders will ask how much you think you’ll be able to afford. Consider figures like what sort of budget you’re looking for in a house and how much you’re willing to spend monthly on a mortgage payment. To figure this, consider your yearly salary and combine it with any assets. If confused, look to a professional to get pre-approved. It’s best to be over-prepared before going in officially.
Credit Card Hopping
The best advice used to be to open several lines of credit and buy something small – say a pair of socks – and then to immediately pay it off. But these aren’t your grandparent’s mortgages. Credit reports are far more sophisticated than they were a decade ago. While longer lines of credit will look stellar on a report, credit opened immediately before applying for a mortgage will look suspicious. Lenders see this and it looks poorly on new credit. It may even disqualify you outright!
Lock in that Rate.
One day’s mortgage rate isn’t another. They fluctuate daily – sometimes lowering, but oftentimes raising. Trust us, you do not want to be caught up in a situation where your lender mentioned one rate, only to see it raise a week later when the paperwork is drawn. When talking about your rates, request having that rate locked-in on the contractual paperwork. You may think these are only fractions of a percentage, but when paid for month to month we’re talking tens to hundreds of thousands of dollars you’ll be saving. That’s just from being proactive!
Veteran homebuyers will already know much to the ins and outs of home buying. However, if you’re a first-time homebuyer be ready for any and all of these things. First and foremost, remember – your lender wants to help you out. So paint the best picture to get them on your side. If you think you have more or better mortgage mistakes, please don’t hesitate to tell us on Facebook, or feel free to shoot one of our friendly professionals an email directly!