Ultimate Strategy for Winning the Lowest Mortgage Rate

The mortgage is one of the biggest loans most people take out in their lives. It also incurs high-interest costs due to the sheer amount of the principal. Hence, you should know how to win the lowest mortgage rate. You can save a huge amount of money this way.

Lowering the mortgage rate by even a single point can mean substantial savings.

Here is how to win the lowest mortgage rate.

To make it happen, you need to take care of 3 factors: your credit score, income level and assets.

Boost Your Credit Score

A lower credit score can hurt you in different ways. Your loan application could be rejected. Even if your application for the loan is approved, you may get a high-interest rate.

Your credit score needs to be very good if you want lower mortgage rates. Lenders use the credit score to measure the risk that customers pose. Those with a higher score have a lower risk of default and thus win lower mortgage rates. While those with a lower credit score have a greater risk of default and thus get higher mortgage rates.

Since your credit score reflects your ability to pay back the loan, make sure it is as high as possible.

There are many steps that you can take to boost your credit score. Make sure that you pay your bills on time, don’t miss payments, pay more than the minimum amount and keep your credit utilization rate at no more than 10%.

You should also make it a habit to check up on your credit reports for errors periodically. Make sure that your credit report is completely free of errors before you apply for the mortgage.

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Employment Record

You can present yourself as a safe customer for lenders by maintaining a steady employment record. Don’t change jobs too often. If you have to switch your job, make sure that you have at least 2 years of work with your employer. If you can work for fewer employers, this can serve as evidence of steady employment to your lenders.

You will have to show W-2 forms from the last two years and pay stubs over a few months prior to applying for the loan. If you also earn commissions and bonuses, then show proof of these earnings as well.

Getting a loan can be harder if you are self-employed or if you work multiple part-time jobs. However, getting approved for a loan even under such cases should not be too difficult if you can show steady income proof. Hence, if you are self-employed, you need to supply business records to show how your business is faring. You will also need to show tax returns, profit and loss statements and possibly other records to satisfy lenders about your business income.

But what if you have just graduated? In that case, you will not have a long credit history, nor will you have a long enough employment record. However, lenders can check your employment and confirm it if you have signed the job offer provided by your employer. The offer should clearly show how much your employer is paying you each month.

The same situation will apply if you are employed but have accepted a new job offer. Lenders might be concerned if you are changing your industry. So this is one factor to keep in mind when switching career tracks.

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You may have also been out of the workforce for some time. Gaps in your work history do not mean that you will be necessarily rejected. However, it is the length of gaps that really matter. If you have been out of work for a few months due to a temporary, then this might be easier to explain to your lender. But if your gap is longer than six months, then such a long absence from employment can be much harder to justify.

Save Enough for a Down Payment

The 20 percent down payment amount is the gold standard to aim for. You can greatly boost your chances of getting a loan at a lower interest rate by making a 20 percent down payment. This shows that you are earnest about paying back and have the means to do so. However, doing so is easier said than done. You will have to save money for some time so that it eventually amounts to a substantial 20 percent of your mortgage.

You can get a loan if you pay less than the 20 percent down payment. However, you will be required to take out private mortgage insurance which can cost you around 0.05% to 1% of your loan each year.

To get rid of this extra insurance cost, you will have to bring down the mortgage to under 80 percent of its starting value. This will reduce the amount you will have to pay each month.

Search for Various Lenders

Make sure that you are getting the best possible offer if it is for a loan refinance. You should shop around and look for the lowest rates along with the best payment terms.

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One study shows that you can save around $1,500 if you go for one more quote. If you get quotes from 5 lenders, you can save around $3,000.

When buying something cheaper, you make sure to search around for your options so that you can pick from the best rate on offer. Since the loan can be your most expensive financial undertaking, you should do the same in this case.

Save More Money

The money that you save on your mortgage should go towards your savings. Instead of spending this amount, you should add it to your investment portfolio.

The Doctor Money App can help you maximize savings so that you can boost your portfolio. With the app installed, you can train yourself to save more money each month for a better future.

The Doctor Money app is what you need for more savings so that you can enjoy a safe, stable and secure financial future.

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