Aside from getting approved for a mortgage in the first place, what you’ll pay in interest may be your biggest concern as a homebuyer. If you know you’ll be trying to buy a home in the near future, it may benefit you to learn what you can do now to help yourself later. Improving your financial standing is just one way to lock in a lower interest rate.
Can You Afford To Put Down More?
Today, even commercial banks have programs that allow you to pay just 3% of the home’s sell price as a down payment. That certainly cuts down on your upfront costs, but many people don’t realize it will cost them more over the long term. Conversely, if you can afford to put down the full 20% normally expected as a down payment, your loan will be lower, and you’ll pay less for interest.
What About Special Programs?
Most people go right to the commercial banks and only look for alternatives, if they have been rejected for a traditional home loan. In fact, looking into special programs should be your first move, because it can help you save a significant amount of money. For veterans, down payment restrictions are far less restrictive and there are protections in place, if you get behind on your monthly payments. FHA loans are also attractive for the same reasons, but are open to any U.S. citizen, regardless of military status. Additionally, FHA loans help those with lower credit scores qualify.
USDA loans will help you get a better deal on rural properties. Again, as a government program, there are more lenient down payment requirements and homebuyers can receive extra help in paying the closing costs. If this is your first home, your own state may offer other programs and incentives. By visiting the HUD website, you can find out what options are available to those in your state.
Improve Your Employment Record
Certainly, a mortgage broker AL is going to look at your credit score, but, if your rating is questionable, other factors may be taken into account. For instance, if you can show a stable work history with the same employer for two years or more, lenders are more likely to take a chance on you. Moving around from job to job is an indication that you may not take obligations seriously, as well as showing that you have trouble holding onto a single source of income.
Improve Your Income to Debt Ratio
In addition to your credit score, lenders also look at your income to debt ratio. This is an analysis of what you earn each month versus what you owe each month. You can improve this ratio in one of two ways: either earn more money or reduce your debt. The greater the surplus you have each month, the more this will work in your favor.
There are many opportunities for homebuyers, if you take the time to look. By taking advantage of special programs and preparing in advance of your mortgage search, you can improve your situation. By reducing the interest you’ll pay through smart financial decisions, you can pay off your home that much sooner and put less of a burden on your pocketbook.