Buying a home is a major life purchase for most families in the US today. It means taking out a very large loan and most likely paying that loan off for the next thirty years with interest. There are ways to ensure you can get the lowest interest rate available when you apply for a mortgage. This is an important process to pay attention to since national interest rates are not getting any lower.
1. Make sure your credit is cleaned up and your credit score is high:
-When going through the mortgage application process there is no financial privacy. You need to submit bank statements for several months, they do a credit check, you even need to submit W2’s for several years etc…It is important to make sure you don’t have too much outstanding debt and that none of your debt is in collections. The higher your credit score, the lower your interest rate will be.
2. Try to put down 20% on your new property to avoid paying property insurance for the first few years:
-It can be overwhelming to think about saving enough money to cover the down payment and closing costs on buying a house. It used to be fine to put 5-10% down on a house, but with newer regulations, if you don’t put down 20% you end up paying property insurance (PMI) until you have 80% loan to value (LTV.) This can take years to pay off and add hundreds of dollars a month into your payment that don’t go toward your principal or interest rate. If you do end up paying PMI, try to over pay by $100 or so every month. This will raise your LTV faster and you will get rid of the PMI payment in a shorter amount of time.
Owning your own home, apartment or townhouse is a great investment. It can be very overwhelming, but as long as you go into it educated on the process and armed with tricks to make it an easier process it won’t be as difficult a process.