Are you trying to secure the best mortgage rates in your town? The lowest advertised mortgage rates tend to stay fairly stable, but the actual mortgage rates will vary based on your credit history. There are a few things you can do to prepare before you start applying for your mortgage loans.
Do: Pay Down Your Credit Accounts
The less you owe the better. If you have money left over after your down payment, it's often more financially beneficial to pay down your existing debt than to pay down "rate points" on your loan (directly paying to get a better rate). Pay off credit lines first and then secured lines of credit (such as auto loans) after.
Don't: Close Your Credit Accounts
Your creditworthiness is generally based on your credit utilization rather than your total amount of debt; in other words, it's based on the percentage of your current credit line that you've used. By closing your credit accounts—even if you never use them—you'll make it look like you're using a lot more of your existing credit than you really were.
Do: Apply for Multiple Mortgage Loans
You should always apply for a mortgage with multiple lenders. Not only does this allow you to choose the best rate, but it also gives you power over negotiations—and you can negotiate. Let your lender know if you have a better rate waiting for you. They may try to compete.
Don't: Apply for Other Types of Credit
Remember that you shouldn't apply for any new credit while applying for a mortgage. Most people know enough not to apply for a new car, but even getting a store card at the local home renovations store or applying for a new phone line could mean temporary damage to your credit. Freeze your credit report if you aren't certain what will effect it.
Do: Request Your Credit Reports
You should always request your credit reports and review them for any inaccuracies. Make sure that your accounts are reported as current and that their credit limits are reported as they should be—some creditors don't bother reporting a credit limit to the credit bureau unless you ask for it, which will throw off your credit score.
Talking to a financial consultant or local mortgage broker can be an excellent way to get more information regarding your personal financial situation and the best way to get your best possible mortgage rates.
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