How to Get the Best Mortgage You Can

Your mortgage is one of the biggest financial commitments you will make. Since most mortgages last at least 15 and up to 30 years, and include hundreds of …

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Your mortgage is one of the biggest financial commitments you will make. Since most mortgages last at least 15 and up to 30 years, and include hundreds of thousands of dollars in interest payments, you need to ensure that you get the best possible terms on your mortgage. Here are five tips to help you land a mortgage that is fair and affordable.

1. Get Multiple Quotes
 
You wouldn’t hire a handyman without getting multiple quotes, so why would you purchase a mortgage without ensuring that you have the best one? Get quotes from a variety of lenders, and be sure to let them know you are getting quotes. This will ensure you get each lender’s best possible offer. Don’t forget to check with your neighborhood bank or local credit union.
 
2. Save for the Down Payment
 
If you can wait to purchase a home until you have 20 percent to put down on the property, you can get a loan that does not carry private mortgage insurance, which is basically a monthly fee to protect the lender from any risk that you pose. Since the private mortgage insurance premium is a percentage of the loan, often between 0.3 percent and 1.15 percent, the money can add up quickly over the course of the loan. Waiting to buy is hard, but if it’s feasible it is a good idea from a financial perspective.
 
3. Lower the Debt-to-Income Ratio
 
You probably already know that your credit score is an important part of the home buying equation, but if you have credit card debt, make sure you take a look at your debt-to-income ratio, or DTI. This is the ratio of debt payments, including your proposed mortgage payment, to your income each month. Mortgage lenders want this number to be under 43 percent in most instances. Paying down credit card debt can help make you look like a safer risk.
 
 
4. Show You Can Pay
 
Everyone falls on hard times once in a while. Your lender wants to know that you will be able to pay your mortgage, even if facing an emergency. So, set aside about two months’ worth of mortgage payments into a savings account before you begin applying.
 
5. Consider Using a Broker
 
A mortgage broker can help you shop the market and find the best possible mortgage. While you will pay a broker fee, you may find that the fee is worthwhile in comparison to the cost savings.
 
Shopping for a home is an exciting time, but it also means shopping for a mortgage. With these tips, you can ensure that your mortgage is exactly what you need and can afford.

 

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