How to Get the Best Rate on a Mortgage

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Filed under: Borrower Tips

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Owning a home is one of the most important investments you will have in your lifetime. So naturally, having the lowest mortgage payment possible would be one of the most intelligent things to do.

Here are a few things you can do to help attain the lowest possible rate on your mortgage.

• Maintain a good credit score
  

The best road to a low mortgage starts with making sure your credit score is as high as possible. Understand that lenders will look at your credit score as the main factor of you creditworthiness. It is an excellent idea to know your score and know any about any issues you may have on your credit report. You can see your credit score and report through the three credit agencies: Experian, TransUnion, and Equifax.

• Have a long and consistent work history

Lenders like to see a potential home buyer who has worked consistently at the same job for an extended period of time. Having these two things in place and showing an annual income that has increased over time will more likely give you a better and attractive rate.

• Shop around
  

It is always a great idea to shop around for the best mortgage rate you can find. Working with a mortgage broker has the advantage of gaining access to multiple lenders as the broker “shops” for you.

However, one word of caution…   while you always want the best possible rate, beware of false promises.  If it sounds too good to be true, it might be!

• Shorten the life of your loan

You can also contemplate shortening the length of your loan. Even though that 30-year loan is very “traditional,” financial institutions can offer specific incentives if you choose to take out a 15-year or 10-year loans, which will most likely lower your interest rate, which will then reduce the overall cost of your loan.

Keep in mind that a shorter loan term, while it gives you a lower rate, will also give you a higher payment.  You’ll need to decide which is more important to you – a lower interest rate or a lower payment.

• Set up automatic mortgage payments

Another thing you can do is check with your financial institution to see if setting up an automatic mortgage payment which ensures you will never be late on a payment is a possibility. This could get you a lower interest rate and it is easy to do.

• Keep your loan to value low

The more money you borrow in relation to the value of your home, the higher your rate will typically be.  For instance, if you are borrowing 90% of the value of your home, you will likely have a higher rate than if you were to borrow only 70%.

Obviously, you may be limited by the funds you have available for a down payment or by the equity in your current home, but keep in mind that the lowest rates usually go to those with low loan to value.

If you have any questions or need any assistance, feel free to give me a call or shoot me an email.

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