Getting a mortgage requires a deposit. If you can save as much money for this deposit, you can get a lower interest rate on your mortgage. Most people would pay a 10% down payment for a mortgage. But if you can pay much higher than that, you can get your mortgage for a better rate.
Compare Home Loan Rates from here
Fix your credit score
The higher your credit score, the better. Most lenders will accept a credit score as low as 500. But the higher your credit score, the better mortgage you get. There’s no formula on how your credit score affects your mortgage interest rate. But you’re most likely to get lower interest rates if you have a higher credit score. You can fix your credit score by paying off your debts.
Prepare all the required documents
Make sure to have proper documentation that is up to date. That includes passports, driver’s licenses, bank statements, and payslips. If you’re self-employed, make sure to provide an SA302 Form. This form is evidence of your earnings or proof of income. It will help lenders gain more confidence in you. They’ll be more willing to lend to you since they can gauge whether you’ll be able to pay them back if ever you default.
Keep in mind the kind of mortgage you want
There are all kinds of mortgages. Each fit for a different person or situation. If you aren’t familiar with the kinds of mortgages, here’s a rundown:
A fixed-rate mortgage means you pay a fixed interest rate every time. There are two kinds of fixed-rate mortgages. There’s the 30-year fixed mortgage and the 15-year fixed mortgage. It is the most common type of mortgage that people get. The only difference between the two is the amount of time it’ll take for you to pay off the mortgage.
But each has pros and cons. The 30-year fixed mortgage has a more affordable monthly payment. But a higher interest rate is given since it takes so long to pay-off. A 15-year fixed mortgage has a lower interest rate. But a higher monthly payment since you have to pay it off in a shorter amount of time
Adjustable-rate Mortgage (ARM)
Unlike the fixed-rate mortgage, an ARM’s rate depends on the market conditions. This is risky because your monthly fees will keep going up and down with a chance of it skyrocketing.
Federal Housing Administration Loans
This is a government-insured loan. It is the best loan for first-time buyers or people with low to medium-income and low credit scores. You won’t have to worry about paying it off even if you default. However, you’re required to pay a pretty big premium upfront.
Veterans Affairs Loans
This loan is for those who have served or are serving under the U.S. military and their spouses.
U.S. Department of Agriculture Loan
If you live in a rural area, you can avail yourself of a USDA loan. To see if you live in an eligible rural area, click here.
A jumbo loan is only given to those who can afford it. It requires a larger down payment, a credit score of at least 700, and a low debt-to-income ratio. These are loans that you get if you plan to live in a high-cost area such as San Francisco or Seattle.
Find the best deal for the mortgage that you want
Compare different mortgage deals. Don’t settle with the first one you find right away. There are tons of mortgage providers out there providing different kinds of deals. You want to find the best one that suits your situation. To find the right mortgage deal for you, you can either search online or find a broker to give you the best mortgage deal.
If you’re buying a home, especially for the first time, you want to get the best deal you can. To get a good deal on your mortgage, you need to do a bit of work yourself. That means doing the five things we’ve listed above.