If you are like most prospective homeowner's, you are probably in search of finding low mortgage interest rates.
Finding the lowest possible rate not only saves you money every month, it can drastically reduce the total amount you will pay on a mortgage. In most cases, it will save you several thousand dollars over the course of a loan.
There is no doubt, the lower the interest rate you can secure, the better off you will be financially. So how can you go about securing the lowest mortgage interest rates? Check out the following tips below that can help land you the best rate available and save you money.
1. Consider a Shorter Term Loan
A bank or mortgage lender will normally offer a much lower mortgage interest rate as the terms of the loan decrease. For example, 30 year fixed mortgage rates will usually be higher than a 15 year fixed rate. On the other hand, a 40 year mortgage interest rate will be higher than that of the 30 year loan.
If you are considering a shorter term loan, make sure you can afford the monthly mortgage payment. As the number of years on a possible mortgage decrease, the monthly payments increase to make up the difference. As long as you can sustain the payments over the course of the loan, it can make sense to lock in a lower rate!
2. Improve Your Credit Score
Your credit history is a crucial part of determining if you can lock in a low mortgage interest rate. In today's economy, banks and other lending institutions are relying on ones credit score to determine their risks. If you have a questionable credit history, now is the time to begin taking control.
If you are looking for ways to improve your credit score, start with your every day expenses. Make sure you have paid off as many of your accounts as possible, including any credit card debt you may carry.
3. Increase Your Down Payment
Many banks and mortgage lenders now require a minimum of a 20% down payment in order to take out a loan. Gone are the days of putting down a few thousand dollars on a house for a low mortgage interest rate. As a potential homeowner, you should strive to put down at least 20% of the total cost of the loan.
While it may not always be the case, putting down more on your mortgage loan could lead to a lower mortgage interest rate. Be sure to check with your lender and use a mortgage loan calculator before you make any decisions.
4. Look for Adjustable Rate Mortgages
Adjustable rate mortgages (ARMs) have taken a lot of criticism lately based on questionable loans granted when economic times were good. Now they are shunned by many people as high risk. While in many cases, homeowners have taken out variable rate mortgages that adjust and can no longer afford their homes, there is actually still a place for them.
If you can understand the complexities of an adjustable rate mortgage, then taking out an ARM may be a way to find a low mortgage interest rate. Depending on how long you plan to live in the home you purchase could play a major role in your decision process. Be sure to study up on how ARMs work and their role in the overall market.
5. Purchase Points
Purchasing points against your your loan is not for every homeowner but can be an opportunity to lower your mortgage interest rate. For a few thousand dollars, a future homeowner can buy points on the loan which will provide a lower interest rate. If you are open to purchasing points, make sure you plan to remain in your home for enough years to recoup the additional costs.
To determine if purchasing points is right for you, make sure you find an online mortgage calculator to help you make your decision. Be sure to play around with the numbers and make the best decision that meets your financial needs.
Picking the best mortgage interest rate is a huge decision that should never be taken lightly. Your goal should be to find the lowest mortgage interest rate that is available based on several criteria. While finding the absolute lowest interest rate is not always the best decision, it can definitely help your bottom line!
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