What Do Lower Mortgage Interest Rates Mean for You When Buying a Philadelphia Home?
There are many costs to homeownership outside of the list price of the home, and for many buyers, that includes mortgage interest payments. For many Philadelphia homebuyers, understanding your budget and how much you can afford is the first step to the home search. A major part of this process is getting pre-qualified for a mortgage and approved for an interest rate.
As with any other loan, a lower mortgage interest rate means saving money over the lifetime of the borrowing period. However, because a home is typically one of the largest purchases one would make, a difference of even 1% could make a significant difference. Over the past year, we have seen rates drop below 4%, which has made it historically an excellent time to invest in a home. Even so, it is still extremely important to research every available option and make sure you are working with trusted experts to save yourself valuable money and peace of mind.
- Maintain a high credit score
- Have a long, consistent work history
- Shop around for the best rate
- Ask your bank or credit union for a better rate
- Put more money down
- Shorten the loan
- Consider the adjustable-rate vs. fixed-rate loan trade-off
- Pay for points
- Set up automatic mortgage payments
Taking the Fear Out of the Mortgage Process
A considerable number of potential buyers shy away from the real estate market because they’re uncertain about the buying process – particularly when it comes to qualifying for a mortgage.
For many, the mortgage process can be scary, but it doesn’t have to be! In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and a good credit history.
Once you’re ready to apply, here are 5 easy steps Freddie Mac suggests to follow:
- Find out your current credit history and credit score– Even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® for all closed loans in September was 737, according to Ellie Mae.
- Start gathering all of your documentation– This includes income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
- Contact a professional– Your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much home you can afford.
- Consult with your lender– He or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
- Talk to your lender about pre-approval– A pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you’re serious about buying.
Do your research, reach out to professionals, stick to your budget, and be sure you’re ready to take on the financial responsibilities of becoming a homeowner.
When you are ready to speak with a real estate professional, or even if you simply have questions, remember that The Sells Philly Team
will always be here for you when the time comes!