How to Obtain and Understand Mortgage Interest Rates?

by Rate Shop Rate Shop

Buying a home is one of the biggest financial decisions that anyone will ever make. There are many reasons why people want to buy their own homes. One reason is that buying a home allows individuals to build equity. Another advantage is that its value will increase with time and you have control over renovations.

Here is how you can obtain and understand mortgage interest rates to make an informed decision.

Clear all your existing debts
It is important that you stay prepared when applying for a mortgage. The potential homebuyer must consider learning his credit score and creditworthiness by obtaining a copy of their credit report. Different lenders have different requirements for credit scores. In case you have a low credit score, you must attempt to improve it by paying your bills on time, keeping balances low on credit cards, and paying off all the high-interest debts. You better don’t close out your unused credit scores because it can affect your credit score a lot.
At the same time, you must save as much money as you can to make your down payment. But paying off high-interest rate debt is more important than that. Credit cards have interest rates as high as 26% and are a priority to pay off.

Look for lenders
The first lender you will meet is probably not going to be the best one for your requirements. Instead, you must shop around to compare and choose the best one for you. If you are a good prospect, let three or four lenders compete to provide you with the best mortgage rate. You shouldn’t allow every lender to take a look at your credit report. Once you have decided the best lender for your requirements, you must allow them to check your credit. The fees of the lenders vary from lender to lender.

Make the down payment
If you cannot make 20% down payment on your home loan, the lender will require CMHC insurance. If you use your home equity loan with your down payment, that amount can be leveraged against the purchase price of your home and it will also cover 20% down requirement and help you in avoiding CMHC insurance. This second loan or home-equity loan will most probably have a variable rate or a rate higher than the primary mortgage. So, you better pay it off first.

If needed, you must put extra effort in finding the best mortgage interest rates for you.