Get Better Rates in 2015
Spring and summer are typically peak times for new home shopping, especially for parents who may want to move between school years. As the 2015 season gets underway, mortgage rates are still attractive, and lending options offer flexibility for would-be borrowers. Whether you’re buying your first home or trading up, take some simple steps now to lock in the best interest rate for your dream home.
Beef up your qualifications
Generally, borrowers with a credit score of 740 or more and a down payment of 25 percent will get the best interest rates on their home mortgages. Even if you don’t meet those benchmarks, you can still work toward a better interest rate. Begin by pulling your credit score, review your credit report and dispute any errors in it. Take time to pare down your debt, accumulate funds for a down payment and gather the financial documents you’ll need, such as pay stubs, bank statements and W-2 forms.
The last thing any buyer wants to do is find their dream home and not qualify for the mortgage. A handy resource like Bankrate.com’s “How much money can I borrow for a mortgage?” calculator can help you estimate what you can afford. Get pre-approved by a reputable lender. If you’re in competition with another buyer, a pre-approval letter submitted with your purchase offer may tip the scales in your favor and prevent a bidding war.
Do your homework, and shop around to secure the best rate you can. Look at different types of lenders, starting with your regular bank and/or credit union. If you’re not a member of a credit union, check out membership requirements as many credit unions offer attainable memberships. Consider contacting a mortgage broker who represents multiple lenders. You can also review non-traditional mortgage lenders such as reputable online banks.
Look at loan programs that require a lower down payment
Even with a lower interest rate locked in, the toughest challenge for first-time homebuyers (or current homeowners who lost equity in the housing bust) usually is saving up for a significant down payment. Some loans require 20 percent, but there are other low downpayment loan options.
Fannie Mae and Freddie Mac recently restored loan programs that allow just 3 percent down on a fixed-rate mortgage, but at least one borrower must be a first-time homebuyer.
Keep in mind buyers that put down less than 20 percent usually must pay for private mortgage insurance (PMI), which protects the lender if the buyer defaults. The rate is calculated by how much down payment is provided and the borrower’s credit score. The more you put down and the higher your credit score, the less coverage you’ll need and the lower the cost of PMI.
If you’re purchasing your new home from Pardee Homes, we can save you some time by putting you in touch with our Preferred Lenders. For questions about financing, or to learn more about our homes and neighborhoods, please connect with our New Home Specialists. We are here to help.