About Best Mortgage Rates
Finding the best mortgage rates in an economy with tight credit challenges even people with excellent credit ratings. Luckily, as more people turn away from the housing market, hard work and tough bargaining pay off. Those truly dedicated to getting the best mortgage that they can will be able to if they educate themselves, save up sufficient money for a large down payment and aggressively compare mortgage rates.
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History
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The recent history of the mortgage market was a historical and largely unprecedented anomaly in which large numbers of people were granted mortgages on houses that were expected to rapidly increase in value over the long term. Lending standards were lowered to the point at which many did not have to prove their income or make a down payment on their mortgage. Houses were regarded as investments as well as places to live. The rapid collapse of this housing paradigm has left many people interested in entering the housing market unsure of how exactly to proceed.
Significance
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Qualifying for the best mortgage rates requires that you be able to prove to lenders that you are a safe investment. Raising your credit score and proving a stable income sufficient to cover the mortgage payments over the period of the loan are the two pillars under which the rest of your mortgage acquisition strategy should rest. Lenders are looking for stable borrowers who are well-capitalized and have a proven history of meeting their obligations to creditors.
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Function
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Raising your credit rating cannot happen overnight. It requires a proven ability to pay back borrowed money on a regular basis. The best way to do this is to pay off auto loans and credit cards regularly without missing payments. Eliminating the use of credit from your life will not raise your credit rating. Paying loans back on time or early will. Use credit often, but make full payments as immediately as possible. Take whatever actions possible to avoid bankruptcy. Many mortgage lenders will not even consider approving someone with a bankruptcy in their history, no matter how long ago it occurred.
Considerations
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The two best ways to acquire the lowest mortgage rates possible are to reduce the overall size of the mortgage and to put down a large down payment. This bucks the conventional wisdom, but remember, most people struggle with their mortgages, so some financial rebellion is good sense. Even if you could easily qualify for a much larger mortgage, you can get lower rates by simply looking for less-expensive properties. Small residences cost less to maintain and take less time to clean. Large down payments help to assuage lenders that you are sufficiently responsible, and it lowers their overall risk. If you give them some of what they want, they will give you some of what you want.
Benefits
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If you are not happy with the rates that one lender gives you, even when you make every effort you can to otherwise reduce your rates, it would be prudent to find another lender. Local banks and credit unions can sometimes offer you deals and may be more open to negotiation than the larger banks. If you get the sense that you are expending too much effort in negotiating with one potential lender, drop that lender and move on to the next. When you shop for a mortgage, you sell yourself as a customer. The golden goal of salesmanship is to get to "no" as fast as possible so that you can move on to the next potential partner. Keep this in mind when you're negotiating mortgage rates.
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Resources
- Photo Credit Michel Filion, Flickr
