Buying a home is likely the biggest financial purchase you’ll ever make—one you will pay off for years in the form of a mortgage. Since shopping around and comparing quotes from mortgage lenders can save you tens thousands of dollars, extra research and planning can really be worth your time.
It’s important to find the best mortgage lenders. The total interest you pay on a mortgage can be quite high over the life of the loan. For example, on a 30-year fixed mortgage of $200,000 at 5% interest, you’ll pay a total of $186,511.57 in interest. On the same loan at 4.5% interest, you’d pay $164,813.42 in total interest – $21,687.57 less!
Your interest rate isn’t the only factor to consider when choosing the best mortgage lender and the best mortgage. Here are 5 tips to getting the best deal.
1. Get your credit score in shape
You can negotiate and compare mortgages all you want, but your credit score still has the biggest impact on how good of a deal you’ll get. Mortgage lenders prefer borrowers who have higher credit scores as this shows the person has a history of making on-time payments and is seen as trustworthy.
A lower credit score will mean a higher interest rate, which can be quite costly. With a very poor credit score, you might not even be able to qualify for a mortgage at all.
The first thing you should do is make sure your credit reports are accurate and up to date, because it is possible there are errors on your report that are hurting your score. You should get your report from each of the three major credit bureaus – Equifax, Experian and TransUnion. They are required to provide you with a free copy of your report once every 12 months.