You spend a lot of time and trouble trying to find the perfect home; and while it may not be quite as much fun, you should expend as much or more energy on ensuring that you’ll qualify for a great mortgage rate. The difference in even a half percent over the course of a mortgage will save you literally thousands of dollars.

So how can you get a great mortgage rate?

The first thing that you should do is request to see a copy of your credit report. This document has a lot of influence over the rate you’ll be eligible for, so you need to know where you stand. If there are credit blemishes, you may be able to do something about them. Contest all credit issues. A re-evaluation of your report may increase the report in your favor; and since this doesn’t cost you anything, is always a wise move. If you still have credit blemishes after this, then make sure you have a great explanation for the loan officer. Don’t get blindsided when it really counts. A little preparation will leave you much better prepared to negotiate a great rate.

Make sure that you pay all your bills in full in the months leading up to your loan application. You may be able to explain away a problem as ancient history, but any recent credit issues will be pretty hard to talk your way out of!

The next couple of steps require a bit more hard work, but can save you a lot of money over the long term.

Try to save up as much as you can for the down payment. Customers who can only offer the minimum down payment are regarded as much greater risks to default, and the bank will charge a higher rate as compensation for its increased risk.

Additionally, try to increase the difference between how much you make each month and how much you owe each month. The bigger that gap is, the more attractive you are as a potential customer. The banks want to give you the money, but they just need to be reassured that you can pay for it. A big difference between your income and debt load makes you a great risk, and will help you to qualify for the great rates the banks advertise, but only offer to select customers.

The last step is another easy one. Shop around! You are under no obligation to accept any loan offered to you. It pays to listen to the offers of numerous financial institutions. You’ll see that the terms offered will vary quite a bit. You wouldn’t buy the first house or car that you see, so why buy the first mortgage that you’re offered?

Banks want to give you a loan; it’s how they make a lot of their profit each year. Its all about risk management to them, so by presenting yourself as a low-risk customer, you stand to get the great rates available to attractive customers. It’s not a lot of fun, and it takes a lot of financial discipline, but my making sure that your financial affairs are in order; you’ll save a ton of money.

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