Credit Repair and Home-Buying: How to Lower Interest Rates

Credit Repair and Home-Buying: How to Lower Interest Rates - Lexington Law

Buying a home can incite a variety of emotions. While you may feel excited, you’re probably wary of the financial responsibility and changes to your budget. If your credit score is low, you may also be wondering how the past will affect your ability to secure a good deal. Diminish your worries by tackling these interest-busting mortgage strategies. A low interest rate is the key to smart buying.

    • Focus on credit repair. Credit is king when it comes to low interest rates. Improve your chances of securing a competitive mortgage rate by paying your bills on time and avoiding a few common mistakes. Don’t:
    • -Close credit accounts, even after paying off the balances

    • -Apply for new lines of credit, i.e., add unnecessary inquiries to your credit reports

    • -Exceed a credit utilization ratio of 25 percent

Review your credit reports with a professional, working to remove mistakes and outdated information. A little attention could do wonders for your credit score, allowing you to secure a better deal.

        • Save. Cash pays off big in the world of home-buying. Mortgage lenders are becoming stricter with their loan requirements, often calling for a 10 or 20 percent down-payment before providing mortgage funds. While it may seem prohibitive, supplying a larger down-payment will actually save you money in the long run. Up-front spending will lower your monthly mortgage payments and provide equity, decreasing your level of risk to the lender. Low risk equals lower interest. Do yourself a favor and save for a big home purchase. The result will lead to stronger and healthier debt.

 

        • Study the market. If your credit is within the good or excellent range, sometimes securing the best interest rate requires a little market research. For example, Marvin began shopping for a home in January 2014. He did some research and found that the best interest rate was 4.64 percent. After two months, 30-year fixed rates have dropped and risen again to 4.50 percent. Seeing an upswing, Marvin decides to apply for a loan now before the market improves. Take a closer look at the defining factors of interest rates. What you learn will help you determine when to take the next step.

 

            • Go for the lock. A quoted rate is useless until it’s guaranteed. Once you’ve found a home and gone through the pre-approval process, ask your lender to lock in your rate to protect you from market shifts. This strategy will allow you to keep the same rate during the final stages of mortgage approval. As an added measure, keep an eye on the market during the days leading up to closing. If the interest rates drop, ask your lender to redraft your mortgage to honor the new rate.

 

The bottom line: Lending conditions are sure to vary, but attention to detail will help you gain a measure of control. Take your buying experience seriously. A better interest rate could save you thousands of dollars.

 

Posted in Mortgages
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