You wouldn’t think of overpaying $50,000 when buying a new house, but you could pay that much extra if you’re not careful shopping for a mortgage.
If you can knock just one point off a mortgage — lock in a 4 percent interest rate instead of 5 percent, for example, for a 30-year term — you could save enough to put your kids through college or retire earlier.
Check out mortgage shopping tips from Money Talks News savings expert Stacy Johnson in the video below, and then keep reading for more advice on finding the right home loan.
Step 1. Polish your credit
To get the best mortgage deal, you need a spotless credit history. This boils down to concrete numbers.
“We literally are told by the credit companies we pull from what the potential rise in their score could be and what actions they have to take to get it there, and we coach them to do that,” says Tina Mulligan, regional sales manager at The Mortgage Firm in Pompano Beach, Florida.
Start polishing your credit score months or even a year ahead of applying for a mortgage.
“There is no quick fix for bad credit scores,” warns Experian, a global credit-reporting firm.
As money expert Stacy Johnson advises in this Money Talks News video about raising your credit score, go to AnnualCreditReport.com, get a free copy of your history and check for mistakes or other negatives appearing on your account. Also, pay down debt so your balances are 30 percent or less of your available credit. You could also ask current lenders for higher credit limits.
However, don’t open new accounts just to show a larger amount of available credit, warns Experian. Lenders may think that those applications for new credit cards mean you’re taking on more debt. And don’t close unused credit accounts, because that will lower your available credit while raising your credit-utilization rate.
While many factors go into your credit score, the most critical is paying your bills on time, Experian says.
Check out Credit Restoration in the Money Talks News Solutions Center for more help, or check out this mortgage tip worth up to $50,000.