Choosing a mortgage is one of the most important decisions you will make in your lifetime. Your home is usually the single largest purchase you’ll ever make and, for many people, their most significant asset.
Finding the right interest rate can save you thousands of dollars over time, so it’s worth some research to find that perfect fit. Here are five tips to help get the best interest rates on your next mortgage:
Check Your Credit Report
Before applying for a mortgage, check your credit report. Look for any errors or marks against your credit that could prevent you from getting a reasonable interest rate.
If you have a poor credit history, this may not be the best time to buy a house. Work on building up your credit for a year or two. If your credit report has errors, have those stricken from your report before applying for a mortgage.
One of the best ways to repair your credit is to engage a professional credit repair company. A credit repair company can help you fix your credit and get those errors removed.
It’s a wise idea to pay in full any debts that are outstanding before applying for a mortgage. Doing so will improve your chances of getting an even better interest rate on your home loan.
Consider a Shorter Loan Term
A 15-year fixed-rate mortgage will have a lower interest rate than a 30-year fixed-rate mortgage. If you can afford the monthly payment on a 15-year fixed-rate mortgage, consider getting this type of mortgage instead.
Work carefully with your loan officer to determine how much your monthly payment will be with a 15-year fixed-rate loan product, as this will probably have substantially higher monthly payments.
Mortgage lenders compete against each other for business, which means that some mortgage lenders attract borrowers by offering a lower interest rate. Talk to at least three different lenders before settling on the lender that’s right for you.
When shopping around, don’t automatically pick the lender with the lowest interest rate. Instead, consider their reputation and the safety of the loan product. Some loans are higher risk than others – and you don’t want to get a loan that will turn out to be a mistake in the long run. Want to do this right?
Go through the process of getting pre-approved. The pre-approval process will reveal the interest rate specific to your situation.
Buy a Home at the Right Time
Mortgage rates are constantly in flux. Sometimes mortgage rates are high, and sometimes they’re low.
If the interest rates are high when you’re thinking about getting a loan, it may be better to wait.
If the interest rates drop to unprecedented lows, this may be the right time to buy a house – even if you were planning to stay one or two years.
If you’re not sure how the interest rates today compare to the interest rates of a year or two ago, contact a mortgage broker who can help you decide whether today’s interest rates advantageous to you.
Your mortgage lender can give you a perspective that can help you decide if now is the time to act.
Pay for Points
A discount point is a fee that you can pay to reduce your interest rate. You pay points at the close of escrow on the house. Paying points isn’t always worthwhile. Are you planning to keep your home for a long time? If so, paying points can save you money.
However, if you’re planning to refinance or sell your house soon, then you’re better off keeping your money.
Points can be confusing. Talk to a mortgage lender to help you decide whether paying points make sense for your situation.
Work With a Mortgage Broker
Your best option to getting the best interest rate for your situation is to work with a mortgage broker or mortgage expert who can walk you through the process.
An ethical lender will help you see the advantages you have so that you can enjoy the best rates for the duration of your loan.