Mortgage rates are currently in the 4s, but rates are slowly rising. This means that now might be the best possible time to buy a home, especially if you’re concerned about how interest rates could affect your monthly mortgage payment. At MorningStar, we believe that beautiful, luxurious homes can be affordable, and that shopping for a mortgage doesn’t have to be painful. We’d love to welcome you to our community. To get started, you need to begin shopping for a mortgage. Here are our best tips when shopping for a mortgage loan.
Get Pre-Approved
Getting pre-approved for a mortgage is one of the best things you can do to improve your chances of owning the home of your dreams. Pre-approval ensures you know exactly how much home you can afford, empowering you to make an offer as soon as you find a home you love. So spend some time shopping for a mortgage before you begin the hunt for a home. Doing so can expedite the process, reduce stress, and help you move your family into your first choice home.
Improve Your Credit
Most lenders require minimum credit scores of 620-640, but a credit score higher than 740 will mean you get the best mortgage rate. Check your credit, and then work diligently to improve your credit score. Some simple strategies include:
- Disputing any debts you don’t actually owe. Many credit reports contain errors.
- Paying down some debt, since using less of your available credit will improve your credit score.
- Paying your bills on time.
- Not taking out any new loans.
- Paying down high-interest debt first, since this debt will accumulate fastest.
Consider an FHA Loan
For first-time home buyers and people who have not bought a home in recent years, an FHA loan may be a better option. These loans have less stringent credit and down payment requirements, opening up home ownership to people who might otherwise struggle to get a loan.
Use a Broker if You Need Help
Some people may have difficulty getting a home. For example, if you have previously filed for bankruptcy, are self-employed, have inconsistent income, or otherwise do not fit the standard mold for a home buyer, you may find less favorable rates or qualify for a smaller loan. A mortgage broker may be able to help. Some brokers work for mortgage companies, and will steer you to a specific lender. Others are independent, and charge a predetermined rate or get a commission. You’ll typically find a better mortgage through an independent broker.
Ask for Referrals
The stress and excitement of buying a home sometimes causes would-be buyers to suspend critical thinking. They jump at the first loan opportunity, excited to have the chance to move into their dream home. Don’t do this. Instead, ask people you trust for referrals to both lenders and brokers. You may also want a referral to a real estate agent. Read online reviews and ask plenty of questions before agreeing to work with anyone.
Compare Rates
Don’t just accept the first offer you get. Compare rates across lenders. You might be surprised to find significant variability. Two different lenders might offer you different rates, or pre-approve you for vastly different loan amounts. Other requirements, such as down payment, can also vary. So shop around. After all, you may be working with this lender for several decades. It’s worth it to spend a little extra time to ensure you make the right choice.
Select Your Own Lender
Many real estate agents form close relationships with specific lenders, and push you toward their preferred choice. But you don’t have to go that route. Instead, choose your own lender—and your own mortgage broker, if you need one. This ensures you get the best possible rate, and forces people to compete for your business, rather than just bank on getting it based on their relationship with someone else.
Be Sure to Ask Your Builder
If you are buying a new construction home, which we hope you are soon here at MorningStar, be sure to ask your Builder if they are offering any incentives tied to their in-house financial arm. A number of MorningStar Builders are covering buyers closing costs if you go with their preferred lender. Again, this is just an option, if you have done your research and followed the steps listed above – you have already found the right lender for you. Stick with it – it will make the homebuying process all the better if you are confident with your financial support.
Ready to begin your search for a beautiful new MorningStar home? We’d love to answer your questions! Give us a call or drop us a line. Or check out some of our currently available homes, and start imagining your life in MorningStar.