When you’re excited and on the hunt for your dream house within your price range, it’s easy to let the nitty-gritty financing details fall by the wayside. Let’s keep our eyes on the bigger picture by going over how to find the best mortgage interest rates in Harford County.
Be the Ideal Candidate
A good place to start is by focusing entirely on your own finances.
Ordering your annual free credit report and combing through it for any forgotten debts or errors is your first stop. Contact the credit rating agency and file a dispute if there are any inaccuracies, but make note of any debts you have outstanding.
A great way to make yourself more attractive to mortgage lenders is to lower your existing debt as much as possible – you shouldn’t need to eliminate it entirely. The reason for this is they use a ratio called the debt-to-income ratio – or your DTI – to help determine your loan risk.
By lowering your monthly overhead and additional debts, you will improve your DTI and increase your chances of not only having your mortgage approved but locking in a more favorable interest rate.
It’s common for homebuyers to qualify for special loan programs and never take advantage of their benefits.
You should check in with your local branch of the Federal Housing Administration to see if you happen to qualify for any VA, USDA, or first-time homebuyer programs. The perks of these programs can vary wildly from one to the next, but they will often allow lower down payments, interest rates, and could even finance your entire home purchase.
Don’t be one of the many buyers that fail to have a clue what they’re missing out on and call your local FHA branch office to see if a county, state, or federal loan program might be able to work for you.
One of the most-discussed and dreaded components of purchasing a home, the down payment acts as a loan starter for most buyers.
If you are unable to take advantage of one of the loan programs from our previous point, you will want to aim for putting down 20% of the price of your new home at closing. The reason for this magic 20% is to avoid Private Mortgage Insurance or PMI.
As an owner, PMI acts as nothing more than an additional charge on top of your monthly mortgage payment. So, avoiding it at all costs is highly advisable.
More commonly referred to simply as points, discount points are offered as an incentive to reduce your loan’s interest rate in exchange for additional money down at closing.
Each point is equivalent to another 1% of the home’s value, so purchasing 1 point on a $200,000 loan would cost you an extra $2,000 at closing. Normally you want to calculate how long it takes you to make up for that upfront cost with the savings on your reduced interest rate.
However, if you’re looking for every possible avenue to reduce your interest rate, purchasing points will certainly accomplish that goal.
Too often you will see a buyer apply with one lender and then begin working with that one lender without taking a glance at other opportunities.
Different lenders do advertise different interest rates, and you should start by taking a look at what interest rates they are claiming they can offer you. Instead of viewing your mortgage lender as an ominous figure, you must please, understand that this is a symbiotic relationship and they need you to run their business as much as you need them to purchase your new home.
Don’t be afraid to ask questions, interview a few different lenders, and push back when you feel you can receive better from them.
Help Understanding Interest Rates When Buying in Harford County
If you’re looking to purchase a home in Harford County and want to find the best interest rates available to you, contact us today at 443-616-5486!