If you are thinking of buying a house then you should apply for a mortgage. Getting a mortgage isn’t easy; you will have to meet several criteria. Even if you meet the minimum criteria, you might not get a lower interest rate. Simply shopping around from one lender to another or having a good credit score is not enough to get a mortgage with a low interest rate. There are other factors involved as well. Here are some tips that can help you secure a good mortgage.
You will need a very good credit score to obtain a low-interest rate. A credit score of 760 or more is considered to be a good credit score. However, you can get a mortgage with a credit score of 620 as well, but the interest rate will be higher.
You need to document your income for the past two years and it must be stable. If you were unemployed for a long time or if your income declined over the past two years then you are very unlikely to get a mortgage. Even if you get one, the interest rate will be high.
More down payment
If you pay more down payment, your interest rate is likely to go down. Usually, it is required to pay a down payment of 20%. But if you pay more than this then you will pay a low-interest rate eventually.
Shorter loan period
If you take a loan for 15 years instead of 30 years, then you will be paying less interest. So, if you have a secured job and some savings, it’s better to go for a shorter loan term.
You should always have some savings before you decide to buy a house. You should be prepared for emergency situations. You shouldn’t miss any of your mortgage payments; otherwise, the interest amount will increase. If you want to get a good interest rate, you should make sure that you have a good credit score, stable job, ability to pay down payment and get a short loan period.