Wednesday, March 23, 2016
Real Estate Tips: How to Score a Lower Interest Rate in Your Mortgage
Unless you have millions in cash just lying around, you probably won't buy a home and pay for it upfront with cash. Instead, you’ll be applying for a mortgage to be able to buy the property. Banks offer mortgage loans that allow you to purchase real estate and which you make payments for 15 to 30 years or so. You will be paying the mortgage amount as well as the interest that accumulates on that loan. If you qualify for a lower interest rate, you'll pay less over the terms of your loan. Here are some basic tips to qualify for a lower rate.
Make a Higher Down Payment
When you buy a home in today's real estate market, you need to make a down payment equivalent to at least 10% of the total purchase price. It may take you some time to save up for the money you need, but you should consider taking even more time to build up the amount you can offer as down payment. If you can make a down payment equivalent to 20% or more of the purchase price, the lender will view you as a lower risk than other buyers because they are lending you less money, which may result in a lower interest rate.
Reduce Your Debts and Expenses
Lenders look at your credit score and credit history but also your outgoing expenses and total ratio of debt to credit. If you bring home $3,000 a month and spend $2,000 on expenses, you may receive a higher interest rate than someone who brings home $2,500 a month but only spends $1,200 on expenses. You also need to take some time to pay off the debts you currently owe and lower your debt to credit ratio. Having a number of maxed out credit cards or cards that are close to the limit will affect your interest rate.
Simple tips like reducing your debt and expenses and making a larger down payment can help you get a great rate when applying for a home loan.