The Best Place to Start
How to get a great mortgage rate involves several different aspects of your life. While all of them are important some are more so than others. The best place to start is to find a great banker. I’ve said it before and I’ll say it again – I love the internet but nothing replaces a great mortgage professional.
A great banker will do more than quote you a rate and give you a monthly payment figure. He or she will have you come in to their office so you can sit down in privacy and go over your needs, your plans, your finances. You will learn the mortgage process, what you need to do and which mortgage product is best for you.
Debt to Income
Your debt to income ratio is a huge piece of the mortgage puzzle. This is a critical factor in qualifying for a mortgage and it should be. No one should get a mortgage loan they can’t afford. Your debt to income ratio determines this. It determines your mortgage rate too. As a result, you want your debt amount to be as low as possible.
Let’s look at how much you owe on credit cards. That’s debt. Here’s where you need the help of a great banker who can advise you on what to do. Believe it or not, paying off a credit card is not necessarily the best idea.
Student loans are a common source of debt. So are car leases as well as car loans. The bottom line is to remove as much debt as you can strategically. You establish the best strategy with your banker. Lowering your debt to income ratio is how to get a great mortgage rate.
You need a certain amount of cash to pay for a down payment, your home inspections and your closing costs. You should also have at least 3 months (6 is preferable) worth of your monthly expenses in a savings account. I know it’s impossible to figure your closing expenses precisely initially. However, you can get an extremely accurate picture from your banker.
Let’s be honest. Saving money isn’t easy. Most of us barely make it through the month. You would really be surprised at how well you’ll do if you have a written plan. I don’t know what goes on in the human brain. But, write down a plan and it usually happens. So create a savings plan for yourself today.
Don’t buy or lease anything. No kidding at all on this. Getting ready for a mortgage is no time to go shopping. This directly impacts your debt to income ratio and possibly how much money you have in a bank account. You want to build up your cash reserves as much as possible so put off getting a new car, buying a washing machine etc.
Like a savings plan, putting off spending is often a happy revelation for people. Beyond just saving what you would have spent, you enhance your financial profile. Whenever you lease a car, get a credit card to save 10% that day etc. your credit is pulled. This is a credit inquiry and every credit inquiry lowers your credit score. Too many credit inquiries in a short period of time – even within 12 months – raises a red flag to banks.
Check Your Credit Report
Your credit report is something you need to check to protect yourself. Mistakes are made. The FTC found in 2015 that 25% of all credit reports had errors. If you do a Google search you’ll find numerous articles saying 1 out of 5 credit reports have errors and there are many with serious errors.
It takes time to dispute a mistake and get it rectified. Months of time are required to fix things and see your FICO score go up. So check your credit report way before you seek a mortgage.
You can see now that how to get a great mortgage rate involves many things. It should also involve the help of a great mortgage banker. Finding such a person to help and guide you is essential. When you’re ready to start shopping for a house, you’ll identify the type of loan that’s best for you with your banker. Getting prepared early on makes sure you’re in the best possible position.
Enrico “Rick” Casatelli is a great banker. He’s my mortgage advisor at the office and I consider his help invaluable. Give Rick a call at 201-569-7888, Extension 8802, at the office or email him at ECasatelli@weichertfinancial.com