How To Get The Best Interest Rate For You
I want to help you get the very best interest rate, and there for mortgage, possible for you. Over the course of a 30 year mortgage loan, the difference between just .25% interest rate can make a HUGE difference in the amount you pay. It will also make a noticeable difference in your monthly payment, too. Here’s what you need to do!
Check your credit scores, try to improve it
Review your credit report and check for anything that seems fishy. Make sure you don’t have any inaccuracies!
If your score is below 760, its worth the effort to try to improve it! Try paying down your balances and make all of your payments on time. Having a high credit score will open you up to better loan programs as well as better interest rates.
Put more money down
When you make a small down payment on a home, the lender considers you a higher-risk borrower than someone who makes a larger down payment.
One place where you’ll see lenders account for this risk is with (PMI). If you put down less than 20% on a conventional loan, you’ll usually have to pay PMI every month as a part of your mortgage. Until you have enough equity to cancel it (80% loan to value), PMI will affect you the same way a higher interest rate would: by increasing your monthly payment and your total borrowing costs.
Saving up for a bigger down payment can help you avoid PMI altogether. Even if you can’t put 20% down, you can pay less for PMI with a larger down payment. Just remember, a larger down payment can actually get you a lower interest rate because the lender views you as a less-risky borrower.
Consider a different loan program
Different loan programs will offer different interest rates! Check with your lender and see what is the best option for you.
Although they tie you into a higher monthly payment, a 15 year mortgage will typically have a lower interest rate than a 30 year mortgage. You could also consider an adjustable rate mortgage. Although they come with different risks, they do typically start out with a smaller introductory rate.
Increase your income
When applying for a mortgage, your lender will look into your “Debt to Income ratio”. This just means that they will look into how much of your income you have leftover and how much is already accounted for to pay bills.
Although obvious, Increasing your income will make your debt to income ratio more appealing because you will have more money left over, and therefore be a safer borrower.
Decrease your debt
Pretty much the same idea as increasing your income, try decreasing your debt! This will not only make your debt to income more appealing, but it will also help improve your credit score!
Buy-down your interest rate with discount points
Did you know you can buy down your interest rate with discount points?
A discount point is basically a fee you can pay at closing to reduce your mortgage interest rate. Paying points can be worth it if you keep your mortgage long enough. If you refinance or sell within a few years, paying points may not be worthwhile.
- One point is equal to 1% of your loan amount, so if you’re borrowing $200,000, 0.8 points would cost $1,600.
How much can you lower your mortgage rate by paying points? It depends on market conditions, but a rate reduction of 0.25% per point is a good benchmark.
In slower markets, I like to ask sellers to buy these for my clients before we discount the purchase price, this will have a bigger effect on your monthly payment than lowballing the seller!
Hope that helps! Email me with any questions, or if your would like recommendations to amazing lenders that can help you.
I'm McCall Carter and I love helping first time home buyers make their first home more affordable and I love helping sellers looking to move up to their forever home. Let me know how I can help you make your real estate dreams come true.
2901 Ashton Blvd. #102
Lehi, UT 84043
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