Is a new home in the new year part of your 2017 resolutions? If you’re ready to move, but want to keep costs down (who doesn’t?), check out these tips from U.S. News & World Report. Marietta Rodriguez shares strategies for finding a dream home that fits you and your budget.
Strengthen your credit score before you look for a mortgage. The majority of people don’t know their credit score until they begin to look for a home or mortgage.
Since looking for a home can take anywhere from one to three months on average, sometimes even longer, it could pay off to use the home shopping time to strengthen your credit score, especially if it means getting a lower mortgage rate. How much lower? Although not every lender is the same, a strong credit score can cut as much as half a percent from your rate.
A housing counselor or credit counselor can provide guidance on what to do to boost a credit score while shopping for a home.
But just as it could pay off to improve your credit before applying and getting approved for a mortgage, buyers shouldn’t assume that an approved mortgage is a done deal. Until all of the paperwork is signed and the home’s keys are handed over, a lender may review the agreement to see the factors that led to a loan approval haven’t changed.
For example: Making purchases that change your credit picture for the worse – like adding new debt or paying a credit card late, even inadvertently – before you buy the house could lead to a lender rescinding the mortgage approval.
Shop around for the best mortgage. As said before, not every lender offers the same mortgage rate, so shopping around is essential, but something the average person doesn’t do. According to data from the Consumer Financial Protection Bureau, nearly half of people who apply for a mortgage don’t shop around. Failing to do so could be expensive month after month, and really add up after several years.
Consider this example of someone borrowing $200,000 for a mid-price home. At a 4 percent rate of interest, the monthly payment is approximately $955. The same amount borrowed at 4.5 percent increases the monthly mortgage to $1,013, or nearly $700 each year.
As important as it is to obtain the best mortgage rate, it’s also important to watch out for fees charged by mortgage lenders. These fees go by various names, another reason to work closely with a housing counselor throughout the mortgage process in order to navigate the complicated process.
{Continue reading: Buying a Home in 2017? 4 Strategies to Keep Your Purchase Affordable }
