Steps to Take Before You Begin House Hunting
Article Submitted By: Sanford Ellowitz
You have made the big decision - its time to buy! However, unless youâre going to be paying cash for that house, condo or co-op, you'll need to take out a mortgage to cover the difference between your down payment and the cost of the property. But before you go house hunting, you should take some steps that can help make the process, including obtaining a mortgage at the best possible interest rate, go as smoothly as possible.
Keep those monthly payments down
Getting the best interest rate on your mortgage is really important because even a small difference in your interest rate can make a big difference in your monthly payments, especially since you’re going to be making them for many years to come.
Great credit can help you score a great mortgage rate
The more creditworthy you are, the greater the likelihood that you will be offered a mortgage with the lowest interest rate, especially compared to someone whose credit rating may indicate, for example, delinquencies paying bills.
Credit rating agencies
To judge your creditworthiness, financial institutions review your rating from the three major credit ratings agencies, Equifax, Experian, and TransUnion.
Your credit rating is expressed numerically. The higher the number the better your credit. Most lenders will red flag applicants with credit scores below 700, so it’s important to be above this number when you’re applying for a mortgage. Even with a score above that you might not get the best possible interest rate, which lenders give only to those whom they judge to be the most like to make payments on time each and every month, so anything you can do to raise it is helpful.
Start by requesting your credit report
First, make sure your credit rating is as accurate as possible by requesting a copy of your report from each credit rating agency. Federal law mandates your right to a free credit report annually from each credit reporting agency, so you might request it, even if you’re if not applying for a mortgage in the immediate future. Then review each of these reports and if, necessary, make any corrections.
Other credit raising steps
Applying for new credits cards or having multiple inquiries made about your credit may affect your report, so try to keep these to a minimum.
Also, large open balances on any of your credit cards may cause a loan officer to question your application, so, if possible, payoff any open balances to show that you’re up to date on all your bills.
BestCashCow.com for the best mortgage rates
Once you know your credit is in order, the best way to compare mortgage rates is to check the offerings on BestCashCow.com. That way you can easly compare interest rates from a variety of lenders, in specific zip codes. Then you can instantly find your projected monthly payment, depending on the size of the mortgage loan you’re applying for and even see the difference in payments between, for example, 15 and 30 year mortgages and fixed and adjustable rate mortgages.
Prequalification makes house hunting easier
After you’ve identified a lender, the next step is to get preapproved for a mortgage. While each lender has their own rules, in general, once you’ve been preapproved for a mortgage, which requires you to present all your documentation to the loan officer, you can go house hunting, confident in knowing how much you can borrow and what your monthly payments will be.
However, make sure you’re preapproved, not prequalified for a mortgage, since preapproval does not always require you to submit financial documentation. It’s possible that even if you’re preapproved, once you submit all the paperwork necessary to get a mortgage, you might not get the mortgage you thought you were approved for.
The next step
Now, with your preapproval letter in hand, its time to take the next step – finding that house of your dreams and financing it with best possible mortgage rate.