Yet again, mortgage interest rates have been shifting gears. If you’re seriously contemplating buying a home, consider these steps to help make your homebuyownership dreams a reality.
Calculate the cost of renting versus buying
Before renewing your lease, look into whether or not purchasing a home would be a better financial option. With the recent drop in interest rates, it’s possible that your mortgage payments could be less than or equal to your rent payments. So why not start building home equity now?
Increase your credit score
One of the most important factors in getting a mortgage is your credit score. The higher your credit, the lower your interest rate will be. However, if your score is a little low, consider consulting a credit repair company to advise you on the next steps for increasing your score.
Know your mortgage options
There are several different programs that mortgage lenders, regional and national banks, and your local credit union can offer. You may also qualify for a government-backed loan, such as a Federal Housing Authority (FHA) loan that provides affordable thirty-year conventional fixed-rate mortgages and low down payment requirements. Also, the US Department of Veteran Affairs finances VA home loans with limited closing costs and some with zero down payment.
Lock in your mortgage rate
With the recent drop in interest rates, try to take advantage of a rate lock, which, depending on the loan terms, will guarantee that your interest rate won’t change for thirty, forty-five, or sixty days. However, any changes to your mortgage application, such as a negative mark on your credit score, a modification in your verified income, or a request to increase your loan amount, will likely void the rate lock. Speak to your lender to see what options are available to you.
Purchase mortgage points
Buying mortgage points, also known as a mortgage rate buydown, can effectively lower your interest rate to make your monthly payments more affordable. There are two types—loan origination fees and discount points. In either case, these fees will always be included in your closing costs.
If 2023 is your year to become a first-time homeowner, size up, or purchase in a different location, discuss the various options with your lender. Be sure to also work closely with your real estate agent to help get you through the homebuying process.