There has been a lot of news lately about rising home prices. But if you are thinking about buying a house this year, there are plenty of things that you can do to make sure you get a mortgage that benefits you financially, time-wise and stress-wise.
Here are some tips in having an awesome mortgage this year:
Find the best lender and realtor for the best experience
Choosing a lender can be more than just identifying who has the cheapest rate, says Chasity Graff, mortgage broker/owner of LA Lending, LLC, in Baton Rouge, La. Her biggest advice for borrowers is to be a little more choosey when picking a loan officer and real estate professional.
“The loan and the borrower’s ability to purchase a home rides on the knowledge and foresight of the professionals they choose to work with,” she says.
There are multiple ways to approach this, one of which is getting your mortgage eligibility checked across a variety of lenders. This lets you see what rates are available to you from different lenders at once.
Make a smaller downpayment
Who wants to have no money left after buying a house?
“I think most borrowers aren’t aware that smaller down payment options exist, even if you aren’t a first-time homebuyer,” says “These notions of having a 20% down payment being ideal were founded when sales prices were at a fraction of what they are now.”
With programs like USDA Rural Development offering 100% financing and FHA/Conventional options with as low as 3 – 3.5% down payments, there is no reason to wait until you have 20%, she adds.
In the amount of time it takes to save that, buyers could have been paying their own mortgage, gaining equity and building their financial wealth.
Find a loan with zero percent down
Zero down financing can be obtained in a variety of different programs.
“My favorite is the VA loan offered to those serving, who have served or who are surviving spouses of service members,” Graff says.
For those who haven’t served but meet income limitations and are willing to buy in certain locations, a USDA (AKA Rural Development) loan is available, she adds.
“I’ve had borrowers purchase homes on both of these scenarios with nothing due at the table. This is when a good realtor that can negotiate seller assistance with the closing costs can be invaluable,” Graff adds.
Choose a no-closing-cost mortgage
The title “no closing costs” mortgage is somewhat deceiving.
“I hear that term thrown around, but technically, there will always be closing costs on every mortgage, the only thing that changes is how they are dealt with and paid,” she said.
On a purchase, you can negotiate a seller to pay some or all of your closing costs. Alternatively, you can also discuss increasing your interest rate to provide a lender rebate towards your closing costs.
Or, for some programs, you can do both to eliminate all closing costs.
Refinance into a 10 or 15-year loan
Any money you can save on a refinance is beneficial, but you have to consider the closing costs that will be charged, the monthly or full term savings, and how long the homeowner plans to own the home. Essentially, you need to look at the whole picture.
“I helped a veteran purchase a beautiful condo and refinanced her less than 12 months later into a new loan saving her over $70,000 over the course of her loan. It greatly improved her Christmas and traveling plans because we structured it to allow her to skip two mortgage payments,” Graff says.
Get a cash-out refinance loan to make life better
Think of your home as a long-term savings account. As you pay your mortgage, you gain equity along with a natural appreciation. This increases your borrowing power, she says.
If you are stuck in some type of long-term debt and you are not getting anywhere, tapping into that equity can save you huge interest charges each month. But remember that trading a three-year debt for a 30-year increase on your mortgage rarely is a smart decision.
Improve your credit score quicker to get the best mortgage rate
Paying down revolving debt is probably the biggest improvement you will see from month to month in your credit score, Graff explains. Getting your revolving balances/credit card debts down to 33 percent or lower can really affect your score.
The better your credit score, the better the mortgage rates that will be available to you.
Also, paying everything on time and dealing with negative accounts before they become a collection can make big leaps into improving your credit score.
Borrow only what you can afford to repay
“What if I told you when we approve mortgages, we look at your gross income before Uncle Sam gets their share, not your take-home pay,” Graff says. “Crazy, right?”
This is why it’s so important to know your limitations before you speak with a mortgage professional. Have a realistic discussion about where you want your monthly note to be –including insurance and taxes. You also need to know what you feel comfortable with for a downpayment and what you want to bring to the closing table.