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Finding Your Ideal Mortgage

Finding Your Ideal Mortgage

When it comes to mortgages, it’s essential to understand that there is no universal solution that fits everyone.

For instance, lenders often try to entice borrowers by offering appealing deals like low-interest rates, advantageous closing costs, and extra incentives, but these perks are typically based on borrowers with exceptional credit scores and low debt-to-income (DTI) ratios.

Whether you’re applying for a fixed-rate or adjustable-rate mortgage, various factors will influence your loan terms and what you can qualify for. Follow the tips in this guide to better ensure you get the mortgage that is right for you—and your budget.

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Consider the source

There are thousands of lending institutions, including banks, credit unions, and investors who may offer better rates and terms. Well-known lending institutions often have higher rates, but many consumers choose to work with them because they consider them more trustworthy due to their established reputation or existing relationship. On the other hand, smaller or independent lenders have the potential to offer lower rates because their overhead costs are not as high. They tend to have more flexibility in their operations, so before settling on one quote, it’s essential to do your homework.

Shop the rate

Many homebuyers often accept whatever their bank or mortgage broker offers them without taking the time to research rates or understand the process. But putting in a little extra effort can make a significant difference. For instance, obtaining two rate quotes could save several hundred dollars on your monthly mortgage payment—up to $600 annually. And if you go the extra mile and get four rate quotes, you could potentially save as much as $1,200.

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Identify market conditions 

While these conditions may be beyond your control, knowing them will help you better prepare for what you can expect in your search and how essential it may be to strengthen your finances. For instance, the tighter the market, the more critical it will be to maintain a good credit score and keep your DTI low to better your chances of getting a more favorable rate.

Investigate closing costs

Closing costs are the fees your mortgage lender charges for their services during the homebuying process. These costs are directly tied to the interest rate on your mortgage; a lender may offer a lower interest rate but offset it with higher closing costs. Carefully evaluate the overall cost structure and consider your circumstances to determine the best option for your needs.

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Review your financials  

Each borrower is evaluated individually, so you should closely examine your finances to better understand your eligibility. As a general rule of thumb, the better your financial portfolio, the more positive you will look to a lender, resulting in a lower-interest-rate mortgage.

Debt-to-income ratio 

Your DTI is your pretax income compared to your overall debt, such as student loans, credit card balances, and auto loans. The debt is calculated as a percentage of your gross income.

Credit score

Lenders typically offer lower interest rates to borrowers with good credit scores. This is because these borrowers are considered low risk and, thus, less likely to default on their loans. In addition, a good credit score provides borrowers access to a broader range of loan programs, including government-backed loans such as FHA and VA loans, which often offer lower interest rates and more favorable terms than conventional loans.

Down payment

Lenders use loan-to-value (LTV) ratios to assess the risk of a mortgage loan. A high LTV ratio indicates that the borrower is taking out a larger loan relative to the property’s value, which is considered a higher risk. As a result, they may be stuck with a higher interest rate.

Be sure to seek advice from an experienced mortgage professional who can guide you through the process and help you find a well-suited mortgage to make your homeownership dreams a reality.

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Kimmer Plunk

Based in Memphis and serving clients in West Tennessee and Northwest Mississippi. Serving others is a reward of its own and part of what makes me happy, and I've been doing that for 30 years through various activities including Girl Scouts, PTO, various board positions, unhoused ministry, and professional, award-winning teaching. I treat others the way that I want to be treated including being readily available, listening to your desires, answering your questions thoroughly, and walking you through the home purchase process. My ultimate goal is to see that you find the home of your dreams and experience the least amount of stress during the process.

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