Friday, October 25, 2013, AM | 1 Comment
Mortgage rates are a tricky business if you don’t know what you are looking for. For sometime this year, the interest rates had swung upwards and now they seem to be settling down again. However, with mortgage rates one can never tell. So before going in for a mortgage, there are always some things that you or any borrower must keep in mind.
For example, if you know the interest rate and the amount of debt money then you can always calculate your monthly payments using the Mortgage Interest Rate Calculator.
Here are some of the things that you need to do before going shopping for a mortgage.
Do the research
Before taking any step, the first thing to do is to get your credit report evaluated by the three credit reporting agencies. This can be done by checking it for free online. In case there are any errors on your report then you can get them corrected.
Also to improve your credit report, you can pay off some of your debt so that your ratings can go up, making you look good to potential creditors who would do a background check.
Another thing to do before looking at houses is to get preapproved. This is something very important. It will boost your chances of getting a good deal on a house because the sellers will know that you already have the financial backing to go ahead with the process of buying a house.
Another advantage of being preapproved is that you will have your budget in place which means you know what you will be spending. This way there won’t be the danger of going below or above your budget. You will be spending exactly what you have been approved for.
Choosing the right rates
There are two kinds of interest rates that you will be offered. One is a mortgage which has a fixed rate of interest and a repayment term of 30 years. The other kind is the ARM or Adjustable Rate Mortgage. Here the interest rate is pretty low for the first few years and then it starts going up typically or fluctuating according to the market.
One good way of making your choice would be by using the Mortgage Interest Rate Calculator. Using this will tell you what kind of monthly payments you will be making. Remember that adjustable rate mortgages are only for people who have the kind of financial stability that will let them pay higher monthly payments in the future.
Choosing the term of the loan
Next up comes the term of the loan. You can either go in for a 15 year mortgage or a 30 year one. The former is for buyers who can afford to make higher monthly payments. However the advantage is that this term comes with lower interest rates.
Also, buyers save on the amount of interest that they have to pay over time. 15 year mortgages are more of a choice with buyers who are looking to refinance their mortgages.
Lock the interest rate
If you have found a mortgage with the right rate of interest then lock it immediately. Rates can rise and fall within very short durations and you wouldn’t want to risk it. The rate can usually be locked for free or sometimes for a fee that is refunded later.
These are some of the tips and tricks on how to play safe with your mortgage. Don’t take too many risks when your financials are on the table here.
About the author
Janine is a freelance financial journalist. She has been working in the industry for over a decade. For first time buyers, she always recommends the Mortgage Interest Rate Calculator. As a hobby, Janine likes to paint countryside landscapes.