Money-Saving Tips for Mortgages

In order to get a mortgage you can live with and be proud of, there are steps you should consider before approaching a lender. Keeping these steps in mind is the key to making sure that the best mortgage is made available to you.

Clean up your Credit Report

Your credit report is naturally going to be a critical part in determining the type and conditions of any mortgage loan that will be offered to you. Higher credit scores mean lower interest rates, and low credit scores mean higher interest rates or indeed, possibly the inability to get a mortgage loan at all.

Long before you approach a lender for a mortgage loan, you should be checking your credit reports from the three major reporting agencies, TransUnion, Experian & Equifax, and cleaning up any discrepancies you find there, paying off any collections accounts you have, and striving to lower the balances on your credit card accounts. This can be a time-consuming process, especially if there are mistakes on your credit report that you will have to write to the agencies in order to clear up, so you should get started on this at least three months before you plan on securing a loan for a home.

Start Saving for a Down Payment

Unless the down payment for your home is coming from an unexpected or rare source like an inheritance, you are going to have to work hard over time to save up a down payment amount that you can be happy with, and which will make the lenders happy to work with you at their best rates. Even if you have access to and plan on taking advantage of a 0% down program like an FHA loan, you should do your level best to generate at least 10% down payment for your home. 20% is better if you can manage it, keeping in mind that the more you show your willingness to put forward money into this joint venture (between you and the lender), the more likely the lender will be to trust you at your word and offer you favorable loan terms.

Know What You Want

Without Overspending!

Though you are better off not seriously looking at homes you are interested in until after you have received pre-approval for a home loan that tells you exactly what you can afford and tells potential home sellers that you are serious, you should get an idea of what you are looking for in a home before you go to a lender. This can be as simple as knowing your neighborhood choice and the range of homes that are for sale in that area. Knowing this will help you to ask for the proper range of loan for the lender when the time comes to seek your preapproval.

Knowing in advance what you want for a home does not mean you should overdo it and look for the most costly home you think you can afford. In fact, you should be looking for the least costly home that you can live with.

Make sure you read the frequently asked questions and answers, regarding this site and mortgage loans, for more information.