Mortgage rates are at historically low levels and are predicted to rise, so there are incredible opportunities for millions of existing and soon-to-be homeowners. Whether you’re looking to refinance or purchase a home, today might represent a historic opportunity to save a lot of money by locking in on the best program and rate. Follow our tips on how to get the best mortgage rate for your credit profile!
Keep your credit healthy
Many factors go into qualifying for a mortgage; however, the number one thing lenders look at is your credit history and score. Looking at how you have paid your debts determines what loan type and interest rate you can receive. Typically, a higher credit score translates into a lower interest rate.
Follow these tips on how to improve your credit score to help you score a better interest rate.
Save for a larger down payment
The average down payment on a home is about 10-20% of the purchase price. Like credit scores, having a higher down payment typically translates into a lower rate. Having a smaller loan amount is viewed as less risky to mortgage companies because the borrower is less likely to default on a loan having a larger initial investment.
If you are struggling to save for a down payment, follow these simple tips on saving. Or, you may benefit from a down payment gift, which can help expedite the saving and home buying process.
Compare different loan programs (Fixed vs. ARM)
When shopping for a low rate, it is wise to review and compare the terms on different programs such as a 30-year fixed, 15-year fixed, 10/1 ARM, or 5/1 ARM. Some programs with shorter loan terms may have lower interest rates. The rate may also depend on your credit score, payment history, employment history, and more.
Consider paying mortgage points
Mortgage points, also referred to as discount points, may allow you to lower your interest rate by prepaying some interest up-front at the mortgage closing. One point equals one percent of the loan amount. Paying points may not benefit everyone; you must consider how long you plan on staying in that home if rates are predicted to fall and when you will breakeven. Your mortgage specialist will calculate your breakeven point to determine if paying points to get a lower interest rate will benefit you in the long run.
Understand when to lock or float
One of the most significant values your loan officer can provide is market intelligence. There are many tools they have available that provide this information. More importantly, understanding the underlying reasons “why” rates are moving in either direction is how they can gauge where interest rates are headed and for how long. This knowledge can be crucial in determining when to float or lock your rate.
Bottom line
Try to maintain a healthy credit score and work with your experienced mortgage specialist to compare mortgage options and lock in on the best program at the right time.
Contact us to learn more about today’s mortgage rates and our loan programs!
