Today’s mortgage rates are at historically low levels. So, scoring a low mortgage rate when compared to other decades in recent history is not hard. The trouble comes in when you are trying to get the average low mortgage rate and your credit or finances keep lenders from offering you the going rate. Or, it could be that despite the going rate, you want something even lower. These are all reasonable scenarios and there are ways to work towards the mortgage rate that you envision.
Prepare Before You Apply
If you know that your credit is shaky, don’t bother to apply for a mortgage loan without first checking into your credit score. You can get your credit reports for free; however, you will have to pay to see your credit scores. You can use some of that payment to procure the services of a credit counseling agency that can recommend some strategies to help you fix your credit in preparation for applying for a home loan. Just be sure to check out the reputation of the counseling agency, as there are some agencies that are fraudulent.
There are also community services offered by state and local governmental agencies that can teach you how to start shaping up your finances to qualify for a good rate. They may have programs where you can even buy a house for less than 20% down payment and even some way to subsidize the mortgage rate, if you qualify based on income levels or special conditions. Check the website of the department of Housing and Urban Development (HUD) to see about the many different programs from FHA to VA and more.
Pay Down With Points
If you want a mortgage rate that is even lower than the one offered (and it’s pretty good as it is), you can still ask if you pay points to lower the rate. Points are 1% of the total value of the loan and paying more points can lower your rate on the life of the loan. Of course, this increases the money you need up front, but if you are shopping for a low mortgage rate, then this is a definite strategy.
Look at Unconventional Loans
This is where people in the housing bust got in trouble, but adjustable rate mortgages are still out there. Currently, the low mortgage rate offered by an adjustable rate mortgage (ARM) for a period of time is what influences people to get these types of mortgages. However, they do adjust and then the sticker shock can be substantial. So, when trying to get a low mortgage rate, make sure you understand whether it is for the life of the loan or a temporary period.
You’ve heard it’s tough getting a home mortgage today, and that’s true. However, the formula for getting approval isn’t too difficult to understand and there are strategies to help you eventually get a home mortgage eventually. You just have to follow the same guidelines that the mortgage brokers will use to determine your creditworthiness to decide whether it’s time to apply for a mortgage. Even if you are turned down, what you learn from the experience will eventually help you qualify later. And, as the credit market eases in panic, you may even find yourself in a great position to buy a low-priced, quality, home with just the right qualifications the lenders are looking for in a borrower.
Your Credit Reports
If you haven’t checked your credit reports in years, do so before you apply for a home mortgage. There are three major credit bureaus that you will need to ask for a copy of your credit report: Equifax, TransUnion, and Experian. You will need to ask for a copy from each of these credit bureaus, as the information is not common between all of them. Some may have entries that others don’t and the key is to clear up all your credit reports so that your credit is sparkling clean by the time you apply for a home mortgage.
Once you receive your credit reports, check out any inconsistencies on it that might be disputed and then dispute them. You won’t get your actual FICO score when you get a free credit report, for that you have to pay. This is actually well worth paying for as the new FICO score that lenders are looking for is anything above 720. The higher your score about this number, the more leverage you have for scoring a low interest rate and favorable home mortgage terms.
Seek Home Ownership Programs
If you aren’t able to qualify for a loan right now there are agencies set up to help low-income people qualify for a home by educating them on the entire process. You will want to check out if you are eligible to participate in any home mortgage and ownership classes to help you resolve issues way ahead of time. Places to find such programs include the Department of Housing and Urban Development and your state’s Housing Finance Agency. Also check out your local yellow pages, but be aware to check the credential of any program with the state agencies so that you don’t end up being defrauded. Other issues that can be discussed in these programs are your income level, your level of debt, and your reasons for buying a home.
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