Once you’re at the point where you believe you can buy a home and have found that home that looks just right for you, you need to qualify for a mortgage. There are all kinds of costs that go into getting a mortgage from origination fees, vendor and insurance fees, and of course, the big ones in down payment, closing costs and interest.
While none of the other fees should be overlooked, your mortgage interest rates usually are the ultimate make or break part of the deal. So how do you make sure you get a good deal upfront for your mortgage?
1. Secure It While The Fed’s Interest Rates Are Low
While factors like your FICO score and whether you go with a government-backed mortgage or private mortgage affect your interest rates, so do the actions of the Federal Reserve.
The Fed certainly lowers and raises interest rates in the interest of economic activity and the strength of the dollar, but the effects are also felt by banks and borrowers. When the Fed’s rates are low, mortgage rates will also below.
If you can get a 15-year or 30-year fixed-rate during a low-interest-rate period, your rates will stay the same throughout the duration of your mortgage, and you won’t need to refinance later unless a special situation would warrant it.
2. Make Sure Your Credit Score And Credit Report Both Look Good
Your mortgage qualification and costs are ultimately going to be determined by your FICO score and detailed credit report. Some things like missed student loan payments or bad credit card management can dock your credit score for a while and linger on your report.
Also, note that hard inquiries made on your credit like the ones most loan officers will make can adversely affect it a little. You should be closely following your FICO score and keeping it at least 620 or better because the higher it is, the better your chances of qualifying for a conventional mortgage or a jumbo loan if applicable.
You can get it higher by cutting down on debt, but also by getting a copy of your credit report and working with the credit bureaus to eliminate errors from it.
3. Think Carefully Before Going With An FHA Mortgage
There are a lot of financial experts who try to steer consumers in the lower credit or no credit brackets to Federal Housing Administration (FHA) loans because they tend to advertise a lot of good deals on the front end.
For one, you can qualify for this mortgage even with a credit score as low as 500 if you can make the 10% down payment. If you have at least a 580 credit score, you only need a 3.5% down payment to qualify.
Sometimes there are options for those who don’t have a credit profile to qualify through an alternative credit check which checks things like rent payments to landlords, utility bills, steady employment income, and other things. But there are a few catches to watch out for:
- You will have to buy mortgage protection insurance both as an ongoing premium and an upfront one
- As You could get hit with higher closing costs, origination fees, and other expenses
- You usually have limits on the amount of your loan, and the terms it will be for
All in all, an FHA mortgage can cost a borrower up to $30,000 more than a conventional one by the time it’s paid off, even though its upfront costs seem lower.
4. Look For A Lender With Fewer Fees
There will always be a few upfront costs with a mortgage, but some lenders like the SCCU no closing costs home loan group can eliminate a lot of them. This loan has no high origination fees, title insurance fees, and even has discount points available.
Basically, you don’t have to leave yourself at the mercy of an FHA lender just to get a good loan. Some lenders like SCCU can work with you on favorable loan terms even if you may not qualify for a conventional mortgage with most other lenders. If you are over the age of 62 and interested in comparing reverse mortgage lenders we recommend comparing rates and reviews at sites such as the BBB and RMR (https://reversemortgagereviews.org).