In the early 80s, mortgage rates were as high as 18%! Now, mortgage rates are as low as 4.
25%.
With historically low rates, now is the prime time to qualify for a loan.
However, a loan is not easy to qualify for due to increasing underwriting standards.
But, if you do buy a property with an inexpensive rate, your mortgage payments should be affordable over the term of the loan.
Furthermore, a fixed rate mortgage has predictable monthly payments compared to a variable rate mortgage's fluctuating payments.
The main steps to acquire a bargain, fixed rate mortgage are: Improve Your Credit Score You credit score is vital for getting a low cost, fixed rate mortgage.
The Fair Isaac Corporation (FICO) calculates your credit score via a proprietary system.
Virtually all lenders check the borrower's credit score before loan underwriting to avoid or mitigate loan payment default risk.
Borrowers with low credit scores (under 720 FICO score) face higher rates, more points, more impound fees, higher down payment requirements or outright loan denial.
Use a Mortgage Broker If you are getting your first loan, use a mortgage broker to shop among numerous lenders to find the most appropriate mortgage.
They are versed in the pros and cons of each loan and can help you avoid pitfalls.
They know which loans will not work for fixer upper properties, they know which loans have mortgage insurance (which raises monthly payments) and so on.
As with any professional, check references with prior customers and check the license.
Ask for a detailed loan cost estimate to avoid unpleasant surprises.
Beware of mortgage brokers who receive kickbacks from lenders for steering business to them.
Research Researching the Internet helps you compare rates and terms among the various lenders and their products.
Compare loan products' Annual Percentage Rate (APR), not their quoted rates.
APRs factor points into the calculation of the actual rate you are paying.
Credit Unions vs.
Banks Lenders profit by lending money.
They make money upfront with underwriting fees, they make money monthly via arbitrage, they make money from servicing your loan and they make money from selling your loan - multiple streams of profit.
Typically, member-owned credit unions offer better rates than for-profit banks.
Credit union rates are not only lower, but also they tend to have less overall fees in general.
Gather All the Qualifying Documents To obtain loan pre-approval, gather all relevant documents.
This includes the last 2 months' paystubs and bank statements.
Some strict lenders even ask for the prior 2 years tax returns and statements from all income sources (bank, brokerage, partnerships, etc.
).
Virtually all lenders will run a credit check on you.
Your credit reflects both your ability to pay and your willingness to pay.
Tips for Getting a Low Cost Loan • Check your credit report by ordering a free annual credit report from each credit bureau.
• Improve your credit score by promptly paying bills and maintaining favorable credit utilization ratios.
• Check references and license of the mortgage broker and lender.
• Check lender credits to you at the close of escrow.
• Ask lender for a loan cost estimate to find out your total closing costs and expected monthly payment.
• Know your loan product intimately - points, rates, monthly payments, prepayment penalties, term, rate adjustment factors (if variable rate) and the consequences of non-payment.
25%.
With historically low rates, now is the prime time to qualify for a loan.
However, a loan is not easy to qualify for due to increasing underwriting standards.
But, if you do buy a property with an inexpensive rate, your mortgage payments should be affordable over the term of the loan.
Furthermore, a fixed rate mortgage has predictable monthly payments compared to a variable rate mortgage's fluctuating payments.
The main steps to acquire a bargain, fixed rate mortgage are: Improve Your Credit Score You credit score is vital for getting a low cost, fixed rate mortgage.
The Fair Isaac Corporation (FICO) calculates your credit score via a proprietary system.
Virtually all lenders check the borrower's credit score before loan underwriting to avoid or mitigate loan payment default risk.
Borrowers with low credit scores (under 720 FICO score) face higher rates, more points, more impound fees, higher down payment requirements or outright loan denial.
Use a Mortgage Broker If you are getting your first loan, use a mortgage broker to shop among numerous lenders to find the most appropriate mortgage.
They are versed in the pros and cons of each loan and can help you avoid pitfalls.
They know which loans will not work for fixer upper properties, they know which loans have mortgage insurance (which raises monthly payments) and so on.
As with any professional, check references with prior customers and check the license.
Ask for a detailed loan cost estimate to avoid unpleasant surprises.
Beware of mortgage brokers who receive kickbacks from lenders for steering business to them.
Research Researching the Internet helps you compare rates and terms among the various lenders and their products.
Compare loan products' Annual Percentage Rate (APR), not their quoted rates.
APRs factor points into the calculation of the actual rate you are paying.
Credit Unions vs.
Banks Lenders profit by lending money.
They make money upfront with underwriting fees, they make money monthly via arbitrage, they make money from servicing your loan and they make money from selling your loan - multiple streams of profit.
Typically, member-owned credit unions offer better rates than for-profit banks.
Credit union rates are not only lower, but also they tend to have less overall fees in general.
Gather All the Qualifying Documents To obtain loan pre-approval, gather all relevant documents.
This includes the last 2 months' paystubs and bank statements.
Some strict lenders even ask for the prior 2 years tax returns and statements from all income sources (bank, brokerage, partnerships, etc.
).
Virtually all lenders will run a credit check on you.
Your credit reflects both your ability to pay and your willingness to pay.
Tips for Getting a Low Cost Loan • Check your credit report by ordering a free annual credit report from each credit bureau.
• Improve your credit score by promptly paying bills and maintaining favorable credit utilization ratios.
• Check references and license of the mortgage broker and lender.
• Check lender credits to you at the close of escrow.
• Ask lender for a loan cost estimate to find out your total closing costs and expected monthly payment.
• Know your loan product intimately - points, rates, monthly payments, prepayment penalties, term, rate adjustment factors (if variable rate) and the consequences of non-payment.
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