It is a common misconception that in order to get a mortgage, you need to have perfect credit. This is not the case. There are many lenders who are willing to work with people who have less than perfect credit. In fact, there are even programs specifically designed for people with bad credit.
If you are looking for a new home and are worried about your credit score, here are 10 tips that can help you get a mortgage loan and save money:
1. Check your credit report and score.
This is the first step you should take before applying for any type of loan. By checking your credit report, you will be able to see where your credit stands and if there are any red flags that you need to address. You can get a free copy of your credit report from AnnualCreditReport.com.
2. Get pre-qualified for a loan.
Pre-qualifying for a loan gives you an idea of how much you may be able to borrow and what interest rate you can expect to pay. It is important to note that pre-qualifying for a loan is not the same as getting pre-approved. Pre-qualification is based on an estimate of your financial situation, whereas pre-approval means that you have actually been approved for a loan.
3. Shop around for the best interest rate.
Interest rates can vary significantly from lender to lender. It is important to shop around and compare rates before deciding on a lender. You can use websites like Bankrate.com to compare mortgage rates from different lenders.
4. Consider an adjustable-rate mortgage.
If you are worried about interest rates going up in the future, you may want to consider an adjustable-rate mortgage (ARM). With an ARM, the interest rate is fixed for a certain period of time and then adjusts periodically after that.
5. Put down a large down payment.
If you are able to, put down a larger down payment on your home. This will help you reduce the amount of interest you have to pay over the life of the loan.
6. Get a shorter loan term.
If you can afford it, get a mortgage with a shorter loan term. For example, instead of getting a 30-year mortgage, get a 15- or 20-year mortgage. This will increase your monthly payments, but you will save money in the long run because you will pay less interest.
7. Make extra payments.
Whenever you can, make extra payments on your mortgage loan. This will help you pay off the loan faster and save money on interest.
8. Refinance if rates drop.
If interest rates drop after you get your mortgage, consider refinancing to a lower rate. This can save you money on your monthly payments and in the long run.
9. Avoid private mortgage insurance.
Private mortgage insurance (PMI) is insurance that protects the lender if you default on your loan. If you put down less than 20% on your home, you may be required to pay PMI. However, there are ways to avoid it, such as getting a piggyback loan.
10. Be aware of the fees.
When taking out a mortgage loan, be aware of all the fees that you may be charged. These can include origination fees, points, and appraisal fees. Ask your lender for a list of all the potential fees so you can compare different lenders.
By following these tips, you can increase your chances of getting a mortgage loan and save money on your payments.
Also refer to interesting post on 10 Amazing Mortgage Loan Tips to Help You Save Money