Are you wondering how to get the lowest interest rate on your mortgage? Getting the best interest rate requires preparation and advanced planning. You must lock in your mortgage rate at the right time. Other factors may also affect your rate, including your credit score, loan to value of the home, the type of home you are buying, and the type of loan you are considering.
Your credit score is a very important aspect in determining what interest rate you will pay. Obtain a copy of your credit report. Any incorrect information can cause your credit score to drop. If you find any mistakes on your credit report, make sure they are corrected before you apply for a mortgage. If you are able to, try to pay down your credit card debt before you apply for a mortgage.
Try to save up money to make a larger down payment on the house. The larger the down payment, the lower the interest rate will be. This is because the lender is taking less of a risk if the down payment is larger. If your down payment is less that 20 percent, the lender may require you to purchase private mortgage insurance. The premium for this insurance will be added to your monthly payment.
Discount points will enable you to pay a lower interest rate on your loan. One percent of the loan amount will equal one discount point. Discount points can lower your interest rate by a quarter of a percent or more.
If you are looking to secure a low mortgage rate, contact several lenders to find out who offers the best interest rate. There are several different places to obtain a mortgage: credit unions, banks, and independent mortgage companies. All of these lenders may offer you a different interest rate. Ask each lender for complete details on the mortgage being offered, such as monthly payment, interest rate, term of loan, and whether the loan is fixed or adjustable. Ask each lender what the loan’s annual percentage rate (APR) is. This APR will include interest rate, points, fees, and other charges.
Once you have gathered all your information from each lender, you are ready to negotiate the lowest interest rate that you can get. Ask if the lender will reduce some of their fees or agree to lower the interest rate or accept fewer points. It’s possible that you may be able to negotiate a better deal, but you will never know if you don’t ask. The final step in obtaining a great interest rate is to obtain a written lock-in from the lender. The lock-in will insure that your rate will not increase while your mortgage is being processed.