Buying a home can be one of the best investments you make in your life, but it can also be expensive if you end up with a bad mortgage. Over time, the cost of the mortgage can eat up precious financial resources that you could have used for other things in your life. The following are a few tips on getting the best mortgage possible.
It starts with your credit report
The better your credit is, the lower your interest rate will be. Therefore, you must first focus on your credit rating. It may be worth delaying the purchase of a home until you can improve your credit rating. The first thing you need to do is obtain a copy of your credit reports. You'll notice I wrote reports and not report. That is because there are three different credit report agencies: Experian, TransUnion and Equifax. You will need a copy of each credit report. What you will be looking for are any mistakes that are listed on your report. Every bad mark on your credit report will make your credit rating worse. Although there are different formulas used to determine your credit rating, all of them are remarkably similar, so the more bad marks you have, the worse your credit rating will be. It is possible that you have a problem with one credit report agency but not the other two. The is the reason why you need all three reports. Credit report agencies can only remove mistakes If there is a mistake on your report, the credit report agency may be able to remove it. Any other issue must be resolved by contacting the company that reported the issue. If it has been a few years since the mark on your credit was reported, you may be able to contact the company and ask them to remove it. Sometimes they will do this. Keep in mind that every bad mark on your credit report will drop off after a few years. Even a bankruptcy won't last past seven years. However, if it's been some time since it was first reported and will probably drop off in another year, you may be able to petition the company that reported it to have the mark removed early. This can often mean a serious savings on a mortgage.
Pay down your credit cards
This is a big factor in computing your credit rating. How much credit you have versus how much you owe. This is often referred to as the credit to debt ratio, and it is also a big factor in calculating your credit rating. Again, the better your rating is, the lower the cost of your mortgage. Take the time and pay down your balances, but remember to not close your account. If you have a zero balance or close to it, the total credit available will help your credit rating. Closing an account will not help your credit score.
Save up a large down payment
Take the time to save up for a large down payment. The larger the down payment the better. Large down payments mean that you will have instant equity in your home, and chances are this will be more than a typical homeowner. When mortgage lenders see this large down payment, they will want to loan you money, and not just one lender, but several. Equity takes a lot of the risk out of the loan. This lower risk combined with competition between lenders will lead to a low cost mortgage.
Think about the length of the mortgage
If you can afford a large down payment, you may also want to consider a 15 year mortgage versus a traditional 30-year mortgage. Although your payments are higher, everything else about a 15-mortgage is better. Obviously, you will pay off your home sooner, but you will also be building equity in your home at a faster rate. This is a savings that you can always tap into if there is an emergency. After paying off your home, the amount of interest you saved on a 15-year versus a 30-year mortgage can be astonishing.
Once you have got your credit rating a good as it can be and you have saved up a healthy down payment, you need to then go shopping for a Pleasanton mortgage. If possible, you should be pre-approved for a mortgage, When you have pre-approval, there is a good chance that you will find better deals on the market for a home. Real estate agents know you are serious and ready to buy. There won't be any financial issues, so it is only a matter of finding the home you want at a price that is acceptable.
