Getting a low interest rate on your home loan
It really is everyone’s dream to be a homeowner. More than simply having a house to live in, we want to own our homes outright…to owe money to nobody. Unfortunately, what gets a lot of us is the interest rate. We manage to pay off the value of our home, but now we’ve got a whopping ten percent interest, or more, to pay off.
That’s how banks make their money. When you think about it, all a bank does is take money from one person and loan it to another. The people who loan their money to the bank (this is what investment accounts are all about) earn a small amount of interest on the deal. The people who borrow from the bank pay a large enough interest to cover the investment account holder’s interest, and to keep the bank running and to make sure it makes a profit out of the transaction.
Whether you go with a bank or a private company, you want to keep your interest rate low, and this really comes down to one thing above all else: keeping a great credit score.
There’s a simple trick to doing this.
The first step is to simply settle all of your old debts. Some banks will loan to you no matter how bad your credit, but you don’t want that, because that comes with high interest rates. Pay off your old debts before you even think of buying a house.
Second, if you’re a shopaholic, cut up all but one of your credit cards. Sorry, but it must be done. People have a tendency to treat credit cards like free money, there’s a psychological impulse to think that, if you don’t see any cash changing hands, then you’re not really spending money.
Now, take the one or two credit cards you have left and start using them for small, simple purchases. Use them for groceries, for gas and maintenance for your car, or even for one big purchase once or twice a year like a TV or a piece of furniture. Pay the bills off when they come. Do not put them off. Do not spend anymore until your current bills are paid. Do this for a year, and you should have perfect credit.
There are some other things to practice. You want to shop around, you want to get a nice, low price on your home, and if you have a history of being handy with home repairs, that might help, too, as you’ll be a safe investment when it comes to maintaining the value of your home.
However, the number one factor for getting a low interest rate for your new home will always be your credit score.
