Consumers should be advised that new mortgage regulations that took effect in January, making lenders adhere to specific guidelines.
Dan Sargent of Alpine Mortgage Planning in Federal Way offers five tips for borrowers looking to secure a mortgage and get the best rate.
1. Pay careful attention to credit. The best mortgage rates often go to borrowers with credit scores of 720 or higher. While those consumers with lower scores usually qualify, make sure your score is the best it can be.
2. Be prepared to document your finances. In a nutshell, lenders want to know the borrower’s ability to repay the loan. Borrowers should gather bank statements, tax returns, W-2s, investment accounts, and documentation of any other assets they own. Also, be prepared to explain any large deposits to accounts-even a check from a family member.
3. Act sooner rather than later. Mortgage rates are expected to rise in 2014 as the Federal Reserve winds down its $85 billion per month bond-buying stimulus program. A rate lock is usually good for 30, 45, or 60 days, although that time period can vary among lenders.
4. Shop around. Lenders have lost a large amount of their refinance business as rising rates encourage fewer home owners to refinance. That means they are turning their attention to homebuyers and may be more willing to compete for their business.
5. Watch your spending. While you might be tempted to go outfit a new home with all new furniture-on credit before closing – it’s better to wait. Lenders will be carefully scrutinizing debt obligations, such as credit cards. Borrowers are advised to keep their monthly debt obligations, including mortgage and property taxes, to below 43 percent of their income.