Taking out a home mortgage is a major financial commitment. In fact, because the typical loan term on a home mortgage ranges between 15 and 30 years and because a mortgage payment is typically the largest expense in a person’s budget, this may be the most significant financial commitment of your life. With this in mind, you do want to take steps to ensure you get the best deal possible. By following a few key steps, you can find the best home mortgage for your needs.
1. Review Your Credit Rating
Before you apply for your home mortgage, review your credit rating. Many home mortgage lenders base the interest rate and loan amount you qualify for in large part on your credit rating. By reviewing your credit rating now, you can identify accounts that are being reported incorrectly and can take steps to rectify that situation. You can also determine if you may benefit from taking a few more months to reduce debt balances before applying for your loan.
2. Analyze Loan Options
Carefully analyzing the loan options available to you is also key to getting the best deal. Some loan programs, for example, may have a slightly better interest rate if you put more money down. By comparing loan options, you can learn which options may be more affordable for you and can take steps to ensure you qualify for those loan programs.
3. Compare APR
The APR, or annual percentage rate, is a calculation that is used to analyze the interest charges, fees and other costs of a loan in full. Comparing the APR of different loan programs enables you to determine which is most affordable. You can typically obtain the APR of a loan program from a mortgage lender, or you can use an online loan calculator to calculate the APR yourself.
4. Provide Full Documentation
There are different types of loan programs that you can apply for, and these generally can be categorized by the amount of documentation you provide to the lender. A full documentation loan typically requires several months of bank statements and pay stubs, several years of tax returns and other related documentation. You can also apply for a limited documentation or stated income loan. In many cases, a loan program that requires greater documentation from you will result in the lowest interest rate. With this in mind, applying for a loan program that is most suitable for the documentation that you are able to provide is key to getting the lowest rate.
5. Negotiate Fees
As a final point, you can also consider the option of negotiating fees with your lender or broker. Some fees are fixed and cannot be negotiated. For example, the appraisal fee is one that is used to pay the appraiser for his services, and this fee typically is non-negotiable. However, other fees like processing, underwriting and origination fees may be negotiable. A lender will have overhead and will need to make a profit from working on your transaction. However, many lenders do have room to negotiate the fees slightly downward.