Get the Best Loan with These Tips
To find the best loan, it's important to know your situation and your needs before you start shopping.
Know your credit score
You are entitled to a free report each year from each of the three credit reporting agencies: Experian, TransUnion and Equifax, but the free reports do not include your score. Your score is a standard by which lenders will evaluate your loan application, so it's a good idea to pay to obtain your score. Look for any inaccuracies and contact the reporting agency to have them corrected. Once your report is accurate analyze your credit: if your score is above 760, you have excellent credit and should be eligible the best rates a lender has to offer. If your score is below 760, you may not be eligible for the best rate, but you are still considered a good credit risk. If your credit is below 620, you are considered a “sub-prime” applicant. You may have difficulty getting financing and even if you do, you may pay a much higher rate. If this is your situation, consider improving your financial situation before you apply for a loan.
Do your mortgage homework
Consider your situation carefully when choosing a loan. How long you plan to stay in the house is a factor. Most people move within 5-7 years, and might benefit from the lower rate of an adjustable-rate mortgage. On the other hand, if you don’t know how long you’ll be in your home, you may prefer the stability of a fixed rate loan.
Negotiate
Ask your mortgage officer what kind of deal they can do for you. They often have leeway to adjust the rate slightly, or waive certain fees. If you have a high credit score, use that as a negotiating strength.
Get a loan you can afford
At the end of the day, you are responsible for your own financial future. Just because a lender approves you for a large loan amount does not mean you can afford it. Start with a budget and be conservative. When budgeting for your new home, don’t forget to factor in additional costs like maintenance and any potential homeowner’s association fees. Figure out how much of a monthly payment you can afford and stick to it. And make sure you know if and when your payments might change over the life of the loan.
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