Politics and Business
7 Steps to Getting a Better Mortgage Rate Like a Pro
Want a better mortgage rate than you thought possible, or a better rate than you got on your first mortgage? Here are the tips you need to follow.
Did you know that the average mortgage rate in America is 3.97 percent? If your mortgage rate is higher than that, then you’re not alone. Surprisingly, some people are paying as high as 4.5 percent for their mortgage rates. However, you don’t have to go broke paying back your loan. Here are seven steps to getting a better mortgage rate like a pro.
Increase Your FICO Credit Score
You might be wondering what the biggest factor in determining the price of a mortgage is. The answer is simple: a high FICO credit score. In fact, increasing your FICO score is the best way to save tons of money on a loan. How can you get an 800 FICO score? Fortunately, there are several ways to expand your credit score. For example:
- Make timely bill payments to avoid late fees.
- Pay off old debts as quickly as possible.
- Limit the number of credit cards that you use.
We can’t emphasize this enough: if you follow our advice, your credit score will improve in no time!
Find a Better Mortage and House Price
Believe it or not, the biggest factor in determining the price of a mortgage is the price of the home that you’re financing. As if that wasn’t enough, there are also three types of loans for mortgages, including:
- Super Conforming
What is a conforming loan? According to the mortgage loan company FreddieMac, conforming loans amount to at least $424,000. That’s not all. Super conforming loans are reserved for those who live in the more pricey regions of the U.S. That’s why your loan can be as high as $636,150 to qualify for this type of mortgage. Finally, jumbo mortgage loans are much larger than both conforming and super conforming loans. That’s why it has the highest mortgage rate.
Be Careful Where You Buy
Have you ever noticed that the most costly regions of the nation have the most inflated mortgage rates? As a result, most of the people that choose to buy homes in these expensive regions qualify for super conforming mortgages. How do you get a good mortgage in a nice location? The key is to buy a home in a more rural town or city. That way, you can shop around for lenders with better mortgage reviews.
Put Down a Hefty Down Payment
Everyone knows that mortgage lenders hate taking unnecessary risks. That means that the less risk that your credit score presents to a lender, the better. Expect to see lower interest rates and higher equity when you put down a hefty down payment. But how large should your down payment be? Experts recommend that you put down at least 20 percent of your home’s value. If you don’t have 20 percent available, it could result in:
- Increased rates of interest
- Private mortgage insurance (PMI)
Of course, paying increased rates of interest or PMI is much better than defaulting on a loan within the first year in your new home.
Get a Shorter Loan Term
Another great way to get a lower mortgage rate is to get a shorter loan term. Why does this matter? Because choosing to pay back your loan as soon as possible greatly reduces your mortgage rate. For example, the interest rate on a 15-year mortgage is much lower than that of a 30-year mortgage. Not only that but selecting a shorter-term loan will help you pay back your debt much more quickly than a longer one. Bottom line: While there’s nothing wrong with getting a 30-year mortgage, you can always save more money with a 15-year mortgage.
Consider Fixed and Variable Rate Mortgages
Do you know what the difference is between fixed and variable rate mortgages is? First of all, a mortgage with a variable rate is less expensive than a mortgage with a fixed rate. But there’s a catch: variable rate mortgages will be raised over time, while fixed rate mortgages will not. Additionally, you can apply for an adjustable-rate mortgage (ARM). ARMs like 5-1 ARM are a wonderful way to:
- Get a lower mortgage interest rate.
- Make payments over time.
Choose the Right Mortgage Type
How do you know which mortgage is the right one for you? While there are many different varieties of mortgages, there are a few popular ones such as:
- Veterans Affairs (VA) loan
- Federal Housing Administration (FHA) loan
- United States Department of Agriculture (USDA) loan
Fortunately, there are also housing programs for people with lower incomes as well. All that you have to do is meet the necessary financial requirements. If you qualify for a low-income mortgage, then you can get a below-average interest rate. For those who don’t qualify for a low-income mortgage, there are still a few options for you, like a traditional FHA loan. Don’t know where to start? You can learn more about home loans with Hunter Galloway. If you enjoyed this article, share it on social media!
Searching for a better mortgage rate doesn’t have to stress you out. When it comes to finding the best mortgage rate, it certainly doesn’t hurt to shop around. When you find the right lender, it’s time to get your finances straight. That means increasing your FICO score, finding a lower home price, and moving to a less expensive area. After you’ve chosen the terms for your mortgage, you must choose between fixed and variable mortgage. As soon as you’ve selected the right mortgage type, you’re all set. If you enjoyed this article, share it on social media!