How Homebuyers Can Get The Best Mortgage
Median sales prices are rising here in Sarasota, along with inventory levels. Though the local real estate market is posting mixed statistics over the past few months, buyers are able to find great properties. Currently, interest rates are near-historic lows and home prices remain affordable. However, the market is dynamic and since the Federal Reserve is incrementally increase rates, now is an ideal time to purchase a property. Since the majority of real estate transactions involves financing, homebuyers can get the best mortgage by being proactive and becoming educated about home loans.
How Homebuyers can Get the Best Mortgage
The very first step to take is to go to Annual Credit Report.com, a site that provides all three credit reports to consumers free-of-charge, one time per year. More than likely, your credit files contain errors. In fact, errant items are so commonplace, 60 Minutes featured a consumer report which revealed more than 40 million contain mistakes, and of those, twenty million contained serious errors which prevent those consumers from obtaining new credit.
Getting a mortgage is a daunting prospect, which explains why so many people seem eager to pat your hand and say, “Let me give you a little advice.” Sure, those pearls of wisdom may come from an ocean of good intentions, but the suggestions might not necessarily be right for you. In fact, they could be dead wrong. --Realtor.com
Take time to go over each reporting bureau's report and file disputes through the mail, not online. A not-so-well kept secret the credit reporting agencies do not broadcast is their online dispute systems are too short to accommodate a legitimate dispute. Through the dispute process, you should seriously get serious about your credit use. It's best to pare down on your open credit lines and of course, make payments on-time. Here are some more tips for how homebuyers can get the best mortgage:
- Lower your credit balances. It's not enough to pay your credit bills on-time because mortgage lenders prefer a debt-to-income ratio of less than 36 percent. Your DTI is the ratio between your monthly income and monthly obligations. In short, the lower your debt-to-income ratio, the better because it means you can afford to repay the home loan. Consider closing some accounts, but maintain a mix of credit types.
- Save a reasonable down payment. Home loans can be obtained with a down payment as low as 3.5 percent. However, the lower the down payment, the more you'll pay each month, reducing your discretionary spending ability. Instead of trying to hone-in on the mortgage debt instrument with the lowest down payment requirement, save up 10 percent to 20 percent. If you are able to put down one-fifth, you'll get out of paying PMI or private mortgage insurance.
- Shop among various mortgage lenders. It's amazing how much research the average consumer will do when purchasing a new television, smartphone, or car, but how little goes into choosing a mortgage lender. Too many people choose the bank where they have a checking and/or savings account, but, it's smart to shop around. Local credit unions, small regional banks, and mortgage brokers all have great potential.
- Know the different types of home loans. FHA, conventional, VA, USDA, fixed-rate, adjustable rate, the choices are plentiful and can be plenty confusing. In most cases, a 15-year or 30-year fixed-rate, conventional home loan is the best choice. However, your situation is unique and it's a good idea to know all the available options. You might be surprised which is the best fit for you.
- Get a real grip on your own personal budget. Our busy lives leave little time for getting into the nitty-gritty of our personal finances. However, when it's time to apply for a home loan, it's also time to dig into the numbers to learn where your money is going each and every month. For instance, if you were asked how much you spend per month on groceries, your ballpark answer is more than likely to be a lowball number away from how much you really spend.
- Put money aside for your home buying expenses. Your cash reserves will play a role in your home purchase. So, put money aside for closing costs, inspections, moving expenses, and some miscellaneous spending. In addition, you should have about three to six months of living expenses saved. Doing so will prevent you from running-up credit card balances and is a wonderful hedge against life's inevitable upsets.
- Get pre-approved, not just pre-qualified, for a loan. There's a huge difference between pre-qualification and pre-approval. The former is just a cursory look at your finances and an estimate of what you might borrow, while the latter is how much you can actually borrow.
When you're ready to find the right home here in beautiful Sarasota, contact us and we'll help you find the property which best fits your wants and needs.