Six Tips to Get Better Mortgage Rates

Getting Better Mortgage Rates Requires Hard Work, Research, and Patience. Use These Tips to Get Informed, Keep Your Head Straight, and Find the Best Mortgage Rate You Can.

Tips for Better Mortgage Rates

The importance of your mortgage rate should be obvious. It determines how much you’ll have to pay each month to service your mortgage, and these payments influence not just how much you pay each month but how capable you are of meeting payment requirements. And if you miss payments, you will lose your home. Follow these tips to find better mortgage rates and decrease the overall cost of taking out and maintaining a mortgage to purchase a home.

1. Plan Ahead

Planning is generally the most important thing with the entire mortgage and home-buying process, along with doing research. The more you plan ahead and start getting information, the better-equipped you will be to find the best rate, because time and information make comparison shopping and negotiating easier.

2. Manage Your Credit

Your credit score is one of the few factors that you have control over and which directly impacts the interest rates banks will offer. You can do a number of things to improve your credit score if you have six months or more to manage it, and you can avoid mistakes that would immediately lower your credit score. The most important things for your credit score are stability and making payments. If you have too much debt or have recently taken on debt, your credit score will fall. If you apply for a new credit card, your credit score temporarily drops until you prove that you can handle the extra credit line.

With extra time and planning, you can ensure that you make all your payments, maybe close extra credit cards, and track down any issues that are negatively impacting your score. All these time-intensive little steps can pay off in a big way if they raise your credit score and result in a lower interest rate.

3. Put More Down

The more you can afford to put as a cash down payment on the home, the less you’ll have to borrow, which typically lowers the interest rate banks will offer. Putting more down is a luxury that many people don’t have, but even a few thousand dollars borrowed from a family member can help.

4. Pick a Mortgage Type and Stick with It

This one is less intuitive, but it can be very helpful if you’re struggling with information overload. Do some research about all the different types of mortgages avoidable to you. Talk to a few respectable banks and let their experts try and sell to you for a while so you get a sense of what types of loans to consider. Then do your research and pick the one that seems to be the best for you based on all the initial information you have. This is a great way to make it much easier to compare rates between banks. If you’re comparing rates from different loans with a range of other varying details, figuring out which is a better deal becomes too complicated. Once you have the right type, you can be sure you’re comparing apples to apples.

5. Shop Around

You see this advice everywhere, and that’s because it’s useful. Comparison shopping and getting mortgage quotes from banks during your pre-approval period is the easiest way to figure out which banks like the idea of lending to you. They may offer different rates on the exact same loan for internal reasons you can’t decipher. And because you know what type of loan you want and have given yourself the time to compare and consider your various offers, you are in the perfect position to ask for quotes and find the best rate.

This is one of the most difficult things for some new homebuyers to do because they are afraid that they won’t get another offer, they’re under time pressure, or they don’t think they can get the same great deal in a day or two if they don’t jump on it. Take the pressure off and use information to find the right deal.

6. Compare Other Costs and Fees

There are a number of other fees and costs that go with signing a mortgage contract, and the more fees you pay, the lower your interest rate tends to be. A general rule is that you shouldn’t be paying fees of more than 1% to 1.5% of the total mortgage value. There are exceptions like very poor credit that can drive this up, and the lower your interest rate, the higher your fees. If you take the time to get an itemized list of every single fee you’ll pay at signing and what your mortgage payments would go to each month, you can compare all these little variables to decide what matters more – a lower rate in the future or paying less in fees now.

The big secret to getting a better mortgage interest rate is to combine planning, research, patience, and preparation. Sometime you don’t have the luxury to use all of these, but the more information and time you have, the better you’ll be at finding the best interest rate banks in your area can afford to offer you.