Getting a great mortgage rate could save you thousands in the long-term. This is one area where you should never settle because even the slightest percentage change in the interest rates could mean a big difference in what you pay over the next fifteen to twenty years.
Finding the best mortgage offers is not rocket science. You just have to take a firm and proactive approach to finding the best offers. This guide is going to show you some of the tricks you can employ in order to get the best mortgage offers.
Your Credit Score
The single biggest influencer when it comes to finding the best mortgage offer is your credit score. The higher your credit score, the lower your interest rates. If your score is too low, you may not be able to obtain a mortgage at all. Furthermore, you may have to put forward a larger deposit if you have a lower credit score.
This is a linear correlation. The higher your credit score, the lower your interest rates. Since this is such a long-term decision, you should wait until you have the highest credit score possible. If this means putting off your purchase for six months, so be it.
Some top tips for building up your credit score include:
- Get a copy of your credit records. Make sure that there are no mistakes on them that could be prejudicing your score. This happens more often than you think.
- Consolidate your debts and begin paying them off on time.
- Reduce the amount you borrow at one time to about 30% of your overall credit potential.
Too many people are impatient, and so they will accept a bad mortgage offer just because they want to buy now.
Employment and Income Stability
If you want a great mortgage offer, you need to make sure that you have a stable income and steady employment. For most people, this is easy because most individuals who have a career have already been in the job for at least two years. The problem comes when you are self-employed.
Self-employed people have to adhere to stricter criteria than anyone else because they never have any guaranteed income. The self-employed will have to submit the same returns as they sent to the tax man, and these will have to be verified.
This does not mean that if you lack a stable income that you are automatically barred from a great mortgage offer. But it may be worth waiting for a year or two so you can show you have a stable income. The difference in interest rates can make this course of action worth it.
Your Debt-to-Income Ratio (DTI)
The DTI is relatively easy to understand because it is just a market for how much debt you are paying out each month compared to how much income you have coming in. If you have no debt at all, you are always going to get the best rates, as long as this is paired with an excellent credit record.
Generally, you want to avoid having anything above 25%. Banks will demand higher deposits and give you higher interest rates if you have a higher DTI.
Work on paying down your debts so you can cut down your DTI.
What has made huge waves in the UK is the fact that deposits for houses are getting higher than ever. It has become the norm for first-time buyers to have to pay 25% in the form of a deposit just to receive a mortgage. This has made it harder than ever to get on the housing ladder.
Over time, the situation will change as banks begin to take more risks, but in the meantime, you can get a better mortgage rate by taking advantage of this part of the house buying process.
For a start, you can offer to pay a higher deposit in exchange for lower interest rates. Most banks will be open to this offer because it means they receive more of their money now. It is the same principle as paying in cash for a house. Most sellers will give you a discount if they can have the money right now with no strings attached.
By accepting a higher deposit, you can get better interest rates in the long-term. It may mean paying more in order to get the mortgage now, but this will pay off to the tune of thousands in the years ahead.
Once you are sure that you have everything in place to get the best mortgage, it is time to begin comparison shopping. There are so many mortgage lenders today that you are spoiled for choice. To start, you should search using the Internet. This will give you a rough idea as to the mortgage lenders offering the best rates.
Once you have shortlisted a number of mortgage lenders you like the look of, begin making appointments with them. During these meetings, you will discuss the home you wish to buy and the potential rates on offer. The lender’s representative will most likely give you an idea as to the rates you can expect to receive, should you be accepted.
If you believe the rate is not right for you, there is no obligation to accept it. The financial landscape changes all the time so you may find it to be a better option to return six months later.
Getting the best mortgage offers is simply about understanding what lenders want to see from you to begin with. The offer you receive revolves entirely around risk. If you are considered to be a risk, you are going to get a rate that reflects this risk. All the lender cares about is getting their money back and making a profit on it, and they aim to do that as quickly as they can.
How will you go about getting the best mortgage offers?