Are you planning to buy a new home in Arizona? For a majority of first-time homebuyers, the thought of buying a home in Arizona comes with so much excitement. However, the process can be overwhelming. From finding a mortgage lender through applying for Arizona home buying programs for first-time buyers, one can quickly feel overwhelmed. The good news is that you can secure the best rates on different Arizona home buying programs if you follow the due process. So, how can you obtain cheaper home buying programs in Arizona? In this post, we feature top tips to help you secure affordable home loans in Arizona.
1. Check Your Credit Score
When you contact the mortgage lender requesting a mortgage preapproval letter, the first thing they look at is your credit score. The credit score is a numerical expression that depicts the buyer’s creditworthiness. Thus, the higher the credit score, the more attractive the buyer is to the mortgage lenders in AZ. Likewise, if your credit score is low, the mortgage lenders will turn you away. The credit score also affects the ability to negotiate a better interest rate. If the credit score is low, the mortgage lender will require that you pay a higher interest rate, to cushion them if you default a mortgage.
Therefore, before you begin applying for Arizona home buying programs, check your credit score. If the credit score is low, work on improving it. This is through the payment of any outstanding debts and ensuring you pay the bills on time. Once the credit score is good, you can begin the process of applying for a mortgage.
2. Show Proof of Steady Income
Mortgage lenders in Arizona prefer borrowers who have a steady income. This is to be guaranteed that the loan will be fully repaid. Thus, you need to disclose the employment status, or bank statement to provide proof that you have a steady income. Long periods of unemployment will not work well when applying for the mortgage. Moreover, upon submitting the mortgage preapproval request, avoid switching employment as it can have a negative impact when you are applying for the loan. For those in business, make sure that the bank statement shows a stable business in terms of cash flow.
3. Start Saving
Mortgage lenders will look at your account to determine suitability for mortgage financing. Thus, you should begin saving so that you will have enough to pay the mortgage down payment and closing costs. The mortgage lenders prefer to work with the mortgage borrowers who have shown a good financial discipline in terms of savings. This indicates that such borrowers are committed to financial security, and it is a sign that the mortgage will be repaid promptly.
4. Work on the Debt to Income Ratio
The debt to income ratio refers to all the monthly debt payments divided by the gross monthly income. The debt to income ratio is one indicator that mortgage lenders consider to determine the ability of a borrower to manage the monthly mortgage repayments. Thus, if the debt to income ratio is high, it shows that the mortgage borrower may not be able to repay the mortgage. In most cases, the mortgage lenders will not lend a borrower whose debt to income ratio is higher than 43%. Therefore, you should keep your debt to income ratio as low as possible.
5. Pay a high Down Payment
The biggest obstacle to homeownership is coming up with the money to pay a down payment. Financial experts advise that where possible, the mortgage borrower should consider paying the highest down payment he or she can afford. Thus, if you can afford a mortgage down payment higher than 20%, you can enjoy a smaller mortgage loan balance. This also gives you an edge when it comes to negotiating for a lower interest rate. Consider that the smaller the down payment, the higher the loan to value ratio, and hence the higher the risk to the lender’s eyes. In that regard, the mortgage lenders tend to compensate for making riskier loans, which is through charging a higher interest rate. Therefore, you can negotiate a better mortgage interest rate if you lower the loan to value ratio, and this is possible by paying a higher down payment.
6. Compare What Different mortgage Lenders Offer
Arizona home buying programs are available through selected mortgage lenders. In that regard, the mortgage lenders have the privilege of setting the interest rate and mortgage terms. To ensure the best rates on a mortgage, you should compare the terms offered by the different lenders. Choose the mortgage lender offering the most favorable interest rates.
To get the best rates on Arizona home buying programs, consider the tips we have covered here. Talk to an experienced mortgage broker for a chance to enjoy the best rates on mortgages.