Securing the best deal on a mortgage is not the same as going shopping and comparing different rates. Instead, there are a lot of factors to consider and some are out of your control. The mortgage interest rate can be a big deal for many commercial real estate investors and the lower you go, the better you are off.
Below are some of the effective ways to get the best deal on a mortgage.
Compare Rates with Multiple Vendors
The interest rate on a mortgage can vary from lender to lender. For achieving the deal, it is ideal to reach different credit unions, brokers, savings and loan associations and bankers. This will provide you with comparative rates you can choose from. This will impact your ultimate decision. In other words, don’t forget to go “Rate Shopping.”
Improve Your Credit Score
Your current credit score is the most crucial factor in the determination of your interest rate. A high credit score means more chances for bagging a lower mortgage rate. This is also one of the main criteria used in the FICO credit score.
A low credit score means that banks and other lenders see you as a higher risk borrower than those with a higher credit score.
Have Your Employment Record
Lenders and brokers dealing in mortgage prefer individuals or businesses that have positive cash flows for at least past two years. If you are an individual commercial real estate investor with a history of unemployment, then it is likely that your application will not be entertained.
Similarly, if you are a small business with negative cash flow, your chances of getting the best deal on a mortgage are low. Lenders are also more inflexible with people who are employed. Many would require you to furnish proper records of your income, and tax returns before making a decision.
Cut Down On Your Outstanding Credit Card Payments
If you are serious about getting the best deal on your mortgage loan, then make sure to spend no more than 20% of your available credit card limit. You can also increase your credit score by getting a credit card from your bank and making small purchases with it and then repaying the outstanding balance.
Your credit utilization ratio makes around 30% of your FICO score. Hence, if you are carrying a large amount of unattended debt on your card, you are diminishing your chances of getting the best mortgage deal.
The Down Payment Effect
The upfront cost you pay to a lender greatly impacts the interest rate you are going to end up with. Thus, the less money you have for the down payment, the more interest you will end up paying throughout the life of the loan.
To counter this, make sure that you have enough cash reserve in your bank that can help you get a minimum of 15%-20% down payment on the purchase of your house. You can also save to finance your down payment before actually looking for mortgage lenders.
Getting the best mortgage rate can save you thousands of dollars in interest payment. And by comparing several loan offers and negotiating the price, you can likely end up with the best deal on your mortgage.