When you're considering a home loan, the mortgage rate you will be offered is based on a number of variables. Some of these correspond directly with the criteria in which the lending institutions used to approve you for a loan in the first place.
However, after you are approved for a loan, there are factors that will dictate the interest rate you will be offered. Saving a quarter percentage point on a $100,000 mortgage can reduce your monthly payment by nearly $20 per month. On a 30-year commitment, that is over $7,000 in savings.
Here are two often-ignored factors, which can affect the interest rate you are offered on your home loan.
You may think it's in your best interest to apply for as many credit accounts as you can, hoping to show you are credit worthy. This is not good advice. Be aware that multiple credit inquiries, or credit checks, bring your credit score down.
Another thing you need to consider is what types of credit inquiries are not recommended. Situations like student loans, and home mortgages are not viewed in the same way as credit card applications, or car loans.
You have a 30-day window that you can usually attack lenders with multiple applications to seek out the best interest rate. However, the best method is to still do the footwork before submitting an application, trying to research which lenders may offer you the lowest interest rate.
Once you narrow down the better options, you can focus on applying to them only. When you're trying to get the lowest possible interest rate on your home loan, remember this rule; do not apply for any type of credit, until you secure and sign your loan.
When lenders begin to calculate the interest rate they are willing to offer, they are frequently swayed by the amount of cash reserves you can show. If you have cash assets, such as money markets, certificates of deposit, or savings accounts, maintain these balances, or increase them if possible.
Some people think that it is wise to cash in certain assets to increase their down payment, assuming it will save them money on their mortgage. This is not always true.
It can also be a good suggestion to take stock of anything of value that you own, but really are not that attached. Sometimes, selling unimportant collectibles or antiques, can generate cash that you can put into a savings account situation. Again, cash assets that you present on your financial statement when soliciting final loan approval can reduce the interest rate on your mortgage.
Once you've met the approval requirements for a home loan, make sure you don't stop improving your financial presentation. Stop applying for credit, other than home loans and build your cash type reserves. These two tips can help you get the best interest possible for your home loan.
Share3 March 2017
When I began my first business selling sports equipment locally, I knew the sports-world well, and I knew how to run a business. One thing I did not know a lot about was the financial world. I had never applied for a loan in my life other than when I financed my car with the dealership in-house financing. My first application at a large bank was denied. I began looking into my other options, and I found that there were more lenders for new businesses than I realized. I applied at local credit unions, local banks, and other business lending services. I was able to secure more funding than I even expected, and my credit is just average. I created this blog to help other new business owners realize that there is funding out there. You just have to find it and apply! Don't give up on your dream.