What Homebuyers Need To Know About Their Mortgage Interest
If you are a first-time homebuyer, you are more prone to making mistakes compared to those who have gone through the process before. One of the biggest mistakes that first-time homebuyers make is only ever getting one rate quote.
The next biggest mistake that people make is not paying enough attention to their interest rates as they should be. Our hope is to stop the cycle of mistakes before it begins. Here are the top 5 things that you must consider when looking into your mortgage interest.
1. Get More Than One Rate Quote
When you are shopping for a mortgage, you need to treat it as if you are shopping for any other expensive item in life. You’re not going to walk into a car dealership and purchase the very first car you see, right? In that case, why would you do it with your mortgage. It is important to understand that mortgage interest rates can vary greatly from one lender to the next, as well as discount points and closing costs.
Our best recommendation is to apply with multiple mortgage lenders to make sure you are saving the most money possible.
2. Correct Errors On Your Credit Report
When mortgage lenders look into whether or not they are going to approve a loan and a certain interest rate, they will first look at your credit report. Unfortunately, many first-time homebuyers don’t check to see if there are errors on their reports, which results in them receiving higher interest rates. It pays off in the end if you spend the time making sure that your credit report is accurate.
3. Paying Discount Points
Many people don’t know this, but you can pay mortgage discount points to reduce your mortgage’s interest rate upfront. Interest rate savings can pay off over time, as you can save a ton of money over the life of a mortgage. Discount points are one of the best ways to take advantage of those savings!
4. Different Mortgage Options Have Different Rates
Adjustable-rate mortgages have a very low initial interest rate, though they allow lenders to adjust interest rates as time moves forward, meaning you could end up with a much higher interest rate than when you first make your purchase. VA Loans allow veterans to purchase homes without a down payment, though they usually have higher interest rates compared to conventional loans. Understanding different types of mortgages is important, as they can greatly impact your rate.
5. Mortgage Interest Can Be Deducted
If you meet the criteria of a homeowner by the IRS, you can deduct the full amount of mortgage interest paid during the tax year that is under the dollar limit. Of course, that mortgage interest can only be deducted if that home is put up as collateral, as this helps to protect the interest of the lender.
Homebuyers venture into the same market every year making the same mistakes as the people before them. We hope that you can take what you now know about mortgage interest and apply it to your personal home buying process.