Negotiating a New Home Loan

Most home buyers don’t have enough cash stashed away to buy a home outright. Assuming you are like most buyers, you’ll need to secure a loan to finance your next home. Here are a few tips to help you secure the best mortgage rates possible.

Monitor your credit scores

Lenders look at your credit rating, employment history, and the amount of your down payment when determining your loan rate. The best rates tend to go to borrowers with higher credit scores, a stable job record and a history of saving.

If your credit is less than perfect, it’s best to work on improving your credit score before applying for a loan. Besides making payments regularly and on time, you should review your reports and ask reporters to correct any bad information.

Compare loan rates

You’ll get the best rates if you shop around. You can start online to see what types of rates are available and then take your findings to local lenders. Get multiple offers, if possible.

Don’t apply for other new lines of credit

If you think you may be in the market for a new mortgage loan, you shouldn’t apply for other lines of credit. All inquiries show up on your credit report – too many could signal that you are at risk of over-extending yourself.

Try to put up a large down payment

Not only will a larger down payment lower your monthly payments and interest each month, it can save you thousands in interest over the life of your home loan. More importantly, banks tend to look more favorably on your loan application when they see a substantial down payment. Given recent financial events, lenders are simply more reluctant to take on highly leveraged loans.

Be aware of fees and points

Be sure to evaluate the points and fees associated with each loan offer – and be sure to consider how long you intend to stay in your next home. You may be able to pay extra points or fees in exchange for a lower interest rate, but if you move within a few years the extra upfront cost could be higher than the savings in interest.

Be patient and thorough

No doubt about it, lenders have tightened their standards, making home loans harder to secure. Do your homework and implement these strategies – and you may just secure better terms than you had expected.

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