For most people, buying a home is the largest purchase they will ever make – one that they’ll be paying off for the next 15 to 30 years. It only makes sense, then, to get the best deal possible on your mortgage. Even a slightly lower interest rate can mean a savings of several thousand dollars over the life of the mortgage loan. So let’s see how to get a great deal on your mortgage in Santa Cruz.
Work on Your Credit Score
Probably the first and best step to take toward getting a great deal on your mortgage in Santa Cruz is to get your credit score in shape. Financial experts in the real estate arena explain: “A low credit score signals that lending to you is risky, which means a higher interest rate on your home loan. The higher your credit score and the more on-time payments you make, the more power you’ll have to negotiate for better rates with potential lenders. Generally, if you have a score under 580. you’ll have a tough time qualifying for most types of mortgages.”
If your credit score isn’t where it needs to be, there are several things you can do to get it healthier. First, though, you should get copies of your credit reports and make sure they are accurate and error-free. After that, try to begin paying off your highest-interest debt in order to lower your overall debt as much and as quickly as possible. And, of course, don’t take on any new debt, especially when it comes to credit cards.
Save for the Down Payment
Generally, the more you can pay down, the more you can count on getting a better deal on your mortgage in Santa Cruz. Paying 20% of the purchase price down should be your target goal. Lenders do, of course, grant mortgages when you pay less than 20% down, but you will typically have to pay for private mortgage insurance – which amounts to .05% to 1% of the original loan amount annually. So if you are unable to pay at least 20% down, try to get your mortgage paid down to less than 80% of the home’s total value, at which point you won’t have to pay for private mortgage insurance any longer.
Understand the Lending Landscape
Understanding the lending landscape can also help you get a great deal on your mortgage in Santa Cruz. If you know something about the main players, you’ll be able to choose the lender that is the best fit for you. The top players in the mortgage-lending arena are:
- Mortgage bankers
- credit unions
- Savings and loans
- Correspondent lenders
- Mutual savings banks
And be sure to check out the reputations of potential lenders with the Better Business Bureau.
After determining which kind of lender is best for you, then begin shopping for a lender in earnest. After you’ve found a handful of likely candidates, compare rates to ensure you get the best deal on your mortgage.
Here’s what the financial gurus recommend: “Start by searching for the best mortgage rates online. Keep in mind that the rate quote you see online is an estimate. A lender or broker will have to pull your credit information and process a loan application to provide an accurate rate, which you can then lock in if you’re satisfied with the product. Once you have several quotes in hand, compare costs and decide which one makes the most financial sense for you. Use your research as leverage to negotiate for the best mortgage rates possible.”
Although preapproval doesn’t directly impact the deal on your mortgage in Santa Cruz, it can have an effect in a roundabout way. When you make an offer with a pre-approval letter in hand, the seller will see you as a serious buyer and may offer you a better deal on the property. You can then re-approach your lender with that lower price and possibly get a better deal on the mortgage.
And you’ll really be ahead of the game if you get pre-approved by more than one lender. “Then,” the experts say, “you can compare Loan Estimate forms from each one to determine who offers you the best rates and terms.”
Ask Questions and Mind the Details
The final part of getting a great deal on your mortgage in Santa Cruz involves asking questions and paying attention to details. Once you have a shortlist of lenders, ask them questions such as:
- How do you communicate with clients, what is your availability, and how long does it take to get a response?
- What kind of turnaround times can I expect for pre-approval, appraisals, and closing?
- At closing, what lender fees will I have to pay?
- Would you be able to waive any of these fees or roll them into the mortgage?
- What, specifically, are your down payment requirements?
In addition, check to see if buying discount points will lower your rate and save you money. Also don’t forget to check into the earnest money condition, specifically under what conditions it can and cannot be returned. Ultimately, the mortgage pros recommend that you always “examine the fine print on your loan documents. These will tell you the exact finance terms . . . and other important details.”
Consult Your Agent
Finally, don’t neglect to consult your agent. Your local real estate agent can be a valuable resource and can point you in the right direction for getting a great deal on your mortgage in Santa Cruz. Find out how our qualified agents can assist you. Contact us today at 831-588-2334.