How to Get the Best Home Loan Rate
Thinking about buying a home? Well, congratulations! Your homeownership journey should begin with an in-depth look at your finances, including a close examination of your credit history, to determine how much you can afford to borrow and whether you need to improve your financials before applying for a mortgage. Next, consider the type of mortgage that will work best for your budget and needs. Then comes the search for a good lender and a great mortgage rate. Fortunately, getting a good mortgage rate is easier than you may think. Here are some tips that can help.
Take a Look at Your Credit Score
Make sure your credit is in the best shape possible before applying for a home loan. One great way to do this is to request and review your credit reports from Equifax, Experian, and TransUnion — the three major credit bureaus. If your score is not quite where it needs to be, take action to repair your credit.
Save up For a Bigger Down Payment
It’s usually a good idea to save up for a bigger down payment, whether you’re taking out a conventional loan or an FHA mortgage. Making a smaller down payment means you’ll have to pay more in private mortgage insurance, making your home loan a lot more expensive. Putting money toward a bigger down payment can get you a lower interest rate as well and, of course, help you avoid those PMI payments altogether.
Opt for A Shorter Loan Tenure
Taking out a shorter-term loan than usual is an effective way to save money on interest and reduce the overall cost of your home. If you’re not financially comfortable with this option, you can consider an adjustable-rate mortgage—especially if your financial situation is likely to change during the time that you own the home.
Lower Your Debt
If you’re not debt-free, you can reduce your DTI ratio by paying off loans before you apply for a mortgage. You can do this via various methods: paying more than the monthly minimum on your credit cards, putting any financial windfalls toward debt, and avoiding opening new credit accounts. Reducing your debt can help you get a lower rate.
