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Finding the Best Mortgage

Finding a mortgagePerhaps you’ve seen the headlines recently that mortgage rates are finally starting to rise. If you are ready to purchase a house and have been waiting, this might be the time to jump. Before you decide to purchase your first or next home, keep these steps in mind to find the best mortgage for your needs.

Compare Banks or Lenders

When we purchased our first house, we had a terrible mortgage representative who was often unavailable and certainly not in any sort of a hurry to close our loan. Because we had to start new jobs, we ended up living in a motel for two weeks before she could finish the paper work for closing. We thought it would ruin the whole process if we started over with a new company.

In retrospect, we probably would have been able to close much sooner if we’d shopped around. There are too many good mortgage lenders, like Clydesdale Bank, to stick with one that doesn’t provide the best possible service.

Clean Up Your Credit Score

Like it or not, your credit score is king when you are applying for a mortgage. The difference of a few points can save or cost you thousands of dollars over the life of your mortgage. Luckily, a credit score can be improved fairly quickly.

  • Make sure you check your score at one of the truly free sites. You are entitled to one free credit report annually. If you have to give a credit card number, this is not the free report you are entitled to. 
  • Call and fix any errors that may exist on your credit report.
  • Try to lower your debt ratio. If you have credit cards with a balance, try to ensure that it isn’t  more than 20% of the credit limit for the card. It would be worth taking an extra job or selling some of your stuff to pay off enough debt to get a better interest rate.

Get Pre-Approved

After you have chosen a lender, get pre-approved for your mortgage before looking at houses. This does not mean that your loan is finalized, but you have an idea of what size of mortgage you qualify for based on your income and expenses. It would be heartbreaking to fall in love with a house to find out that there is no way to afford it.

In my experience, home buyers often get approved for a larger mortgage than they were expecting. When we built our house, our max budget was $215,000, but we were approved for $385,000! This does not mean we could afford an almost $400,000 house, and it would have been a disaster if we had signed on for a mortgage that large at that stage in our lives.

I would recommend doing the math to see what sort of house payment you can afford, and don’t be swayed upwards if you get a larger than expected approval. Also, remember that you have to include costs for property taxes, insurance, and repairs that you don’t have to pay as a tenant.

Buying a house can be one of the best, but largest, purchases most people make in a lifetime. Since it is such a big decision, home buyers should certainly take the time to compare lenders, clean up credit scores, and get pre-approved in order to secure the best possible mortgage.

Image: Freedigitalphotos.net/jscreationzs

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

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