If you are planning to buy a property, and you don’t have cash up front, then the mortgage is your only option. Also, for the vast majority of Americans, buying a home is the most significant transaction they will ever make.
As of 2019, the average house value in the U.S. is $226,300. Since most people don’t have that kind of money available, the mortgage is a necessary part of this process.
If you are selling your home fast in Houston and you are planning to get a new one, you will need some type of a mortgage. So, here is what you can do, to make the best possible deal.
Boost your FICO credit score
This three-digit credit score can make a significant difference between a low rate, and being hit with costlier borrowing terms. Therefore, the credit score is quite a significant factor in evaluating the risk. Every lender will use this score to determine a person’s ability to repay the loan.
The higher score you have, the better the changes you will get an excellent rate. In this case, the bank will be confident enough in your ability to return the money. To improve your score, you need to pay your bills in time and to repay your credit card balance.
Have a regular employment
If you can have at least three years of steady work and earnings, you will be more attractive for mortgage approval. Additionally, if your job revolves around the same company, then you will be in a greater advantage.
Also, make sure to pay stubs and W-2s. On the other hand, if you are self-employed, or you work multiple part-time jobs, then it will be more challenging to qualify for a mortgage.
Prepare money for a down payment
Saving for a down payment and putting more money away can help you get a lower mortgage rate. The ideal situation would be if you could fund 20% of down payment.
Of course, most lenders accept lower down payment. However, less than 20% means you’ll need to pay private mortgage insurance, which can go up to 1% of the original amount loan.
On the other hand, to get rid of mortgage insurance, you will have to pay 80% of your loan. This will additionally reduce the monthly bill, but in some cases it’s not a solution.
Consider 15-year fixed mortgage rate
Usually, owners decide to get a 30-year fixed mortgage rate. But, if you have found an ideal property for you need, think about getting a 15-year fixed rate.
This way, you will pay off the loan sooner. Based on U.S. Bank statistics, the national average for this type of a mortgage is 4.15%. For example, if you get a $260,000 loan, then your monthly payment will be $1,943 compared to $1,264 for 30-year payment.
But, in this case, you will save more than $100,000 on an interest, which is a considerable amount and nearly half of the house payment.