Mortgage rates have remained near historic lows throughout the start of the year – a factor which has, and likely will continue to drive the market forward – but how long will these low rates last? While rates have continued to coast below the 4% mark, the National Association of Realtors has predicted the average rate on a 30-year fixed rate will jump to 4% in the second quarter of 2015, and continue to rise from there. So what can you or your clients do to secure the low rates while they’re still here? We’ve done our homework, and found that these 5 simple tips can help you lock down the lowest mortgage rates possible.
Mind your credit score. Minimum credit scores required by lenders have steadily dropped, and mortgage insurers’ underwriting guidelines have also loosened a bit, but it’s still a little tough. Average FICOs of applicants approved for home loans continue to come down, but they’re still hovering around the 700 mark. Unfortunately, three-fourths of U.S. consumers have scores lower than 700.
Visit your lender before you hit the open houses. Create a game plan that makes sense for your budget. It pays to talk to a lender about what you can afford and qualify for before you fall in love with a home outside your price range.
Just because you qualify for a certain loan amount doesn’t mean that is what you should spend. Consider your monthly budget, and determine what level of monthly payment feels comfortable. Remember that there will be other costs relating to homeownership, including property taxes, maintenance and unexpected repairs.
Don’t make any changes to your financial picture. Once you’ve been preapproved, this is not the time to open new credit cards, change jobs, transfer large sums of money or make big-ticket purchases using credit. Once you are preapproved, don’t apply for any new credit. If you go ahead and finance furniture, it can mess up the amount that you were preapproved for.
If you are self-employed, expect to jump through more hoops. Be prepared to provide two years’ worth of tax returns. If your income fluctuated from one year to the next, underwriters will average the income from the two years. Also, underwriters will look at your income after your business deductions have been taken.
Organize your financial paperwork and keep it up to date. If you are shopping for a home, keep a file and drop in new documents as you receive them, including your most recent pay stub and all pages of your bank statement.
Many times applications sit on mortgage processors’ desks because the borrowers have not supplied everything necessary to get the file into underwriting. If an underwriter needs additional information or documents, get that in as quickly as possible. In a busy office, every time your application needs something else, it may be moved to the bottom of a pile and not resurface for days.