How to Get a Better Deal on a Home Loan

Whether you're considering a home loan for the first time or you're looking to refinance your current loan, banks and loan institutions are out there waiting for you to contact them. Because each financial institution carries their own special offers and fee structures, you can choose which one will give you a better deal on your home loan.

Instructions

1. Improve your credit scores. Lenders offer better loans and rates to consumers who have excellent credit.

2. Increase your income. Although you want to purchase a home for less than what you can afford, in case of a drop in income in the future, by increasing your income, you become less of a risk to the lender, which means they'll be willing to work with you to keep your business.

3. Decrease your debt to credit ratio. Pay off, or pay down, as many outstanding balances as possible. This includes charge and/or credit cards, student loans and car loans.

4. Become a valued customer. Banking institutions do offer better home loans and special offers to their current customers. You may receive percentage rate decreases by having direct withdrawal of your monthly payments from your checking or savings account.

5. Shop around. Each financial institution has their own set fees. Receive quotes and information from at least three places for comparisons as to which would be the better deal on your home loan.

6. Have a down payment. While a 20 percent down payment is required on most home loans to avoid PMI (private mortgage insurance), you can also get a better deal on a home loan by having some type of down payment.

Tips & Warnings

• Ask the lender about deals regarding an 80/15/5 (or 80/10/10) loan, which actually is two loans, one for 80 percent of the price of the home and one for 15 percent, with five percent as your down payment.