Finding the right mortgage rate can be difficult, especially if you’re a newcomer to the industry. While there are several tools and services available for newcomers to the mortgage market, they don’t cover everything, and many will have plenty of questions that they’ll need to be answered when looking for a great rate. In this article, we’ll provide you with the knowledge you can use to narrow down your search and get the best rate possible. Let’s begin.
1. Use a mortgage calculator
Mortgage calculators are fantastic tools for estimating the cost of your monthly mortgage payments. A mortgage calculator takes in various aspects such as the principal of your mortgage, the interest rate, property taxes, and the home insurance you’ve purchased. This is known as your PITI (principal, interest, taxes, insurance), but you can simply refer to it as your monthly rate. Mortgage calculators are also useful for figuring out various mortgage rates to determine which will work best for your specific financial situation.
2. Work on improving your credit
If you’re looking to purchase a home, one way to improve your mortgage rate is to boost your credit score. The better the credit you have, the more willing lenders will be to offer you better mortgage options. By paying off your credit card and personal debts, you can improve your credit limits and score over time.
3. Understand your debt-to-income ratio
Lenders often need to have full disclosure regarding your debt, and, in turn, how much you’ll be making from your gross monthly income. This is known as your debt-to-income ratio or your DTI. Lenders will also consider your employment and income history, and may ask for proof of your income in order to secure your loan. However, if you’re willing to go through this process, it’s likely you’ll receive better, more competitive rates and mortgage terms than other lenders.
4. Look into private mortgage insurance
Your mortgage will come with a number of fees that you may not see coming. One of these is your closing costs, which is a one-time lump sum payment. However, one cost that can keep coming back to haunt your mortgage is known as Private Mortgage Insurance, or PMI. PMI is applied to mortgages when down payments of less than 20% are made and lenders consider the mortgage requester as “high risk”. Because of this, you may have to pay between 0.5% to 1% of your entire loan each year, which can be thousands of dollars depending on the mortgage rate you’ve chosen.
5. Be transparent
Of all the things you can do to ruin your chances of receiving a great mortgage rate, lying to your mortgage assistance agent is the biggest. Transparency and honesty can be scary, especially when it’s related to disclosing your finances, job history, debt history, and more. However, without providing this information transparently to your mortgage agent, they won’t be able to gather a correct picture of your financial history, and, in turn, cannot provide an accurate mortgage rate for you to use.
If you’re still looking into your mortgage rate, but you aren’t sure where to start, there’s assistance available to you. Northwood Mortgage provides consultation to Toronto homeowners and potential homeowners, giving you all the information you need to make an educated decision in your home-purchasing process. You can call us at 888-495-4825 or contact us online to learn more.
