How To Get the Best Possible Mortgage Rates
Getting the best mortgage rate will have huge financial implications down the road. Here's how to do it.
So you're in the market to buy a house. There's a lot to consider when you start this journey, but one thing you should be thinking about starting on Day 1 is what your mortgage will look like.
After all, this is likely to be the single biggest financial transaction you have been involved in, and the difference between the right and wrong choice could cost you tens of thousands of dollars over the life of a loan.
There are plenty of numbers you have to crunch, including the size of your down payment, closing costs, ongoing taxes and so on. However, one thing you'll absolutely need to maximize for yourself is the value on your mortgage rate.
The good news is rates are now lower than ever — averages are hovering below 3% for 30-year fixed-rate loans. So the question is, how do you get the best possible mortgage rates? Here are a few suggestions:
Boost your score
Your mortgage rate is based on a lot of different factors that lenders examine, but the most important is your credit score, Bankrate says. This number gives lenders a snapshot of how you handle your credit cards, student loans and auto financing and so on, and effectively tells them whether you're a "safe bet" to keep paying your mortgage bills for years to come.
Want the best mortgage rate available? You're going to have to do some work first.
It's a simple formula, generally speaking: The better your score, the lower your rate.
As such, you should strive to pay all your bills on time, carry low balances on your cards, and avoid opening new accounts before you start applying for mortgages. Speaking of which...
Just like any other big purchase you make, it's important to hunt for the best deal available. Nerdwallet notes that if you get mortgage rate quotes from as many as five different lenders, you could save hundreds of dollars in interest payments over the course of just a single year.
A word of caution, though: You should aim to file your home loan applications within a few weeks or so of one another. If you space it out too much, you could trigger a credit score penalty.
Make a larger down payment
Finally, if you have the financial means, try to make your down payment as large as possible. The reason why is simple: If you are paying 5% down on a home worth $250,000, the lender is counting on you to pay back $237,500, plus interest, over many years to come. That's a big financial risk for them, and for you.
If you reduce that risk with a larger down payment of 20%, for instance, the risk necessarily goes down, and lenders are more likely to reduce your rates accordingly, Investopedia advises. Crunch the numbers with a mortgage calculator and you'll be able to determine where you might stand based on varying down payment amounts.
When you are in the market for a mortgage*, or any other financial products that can help you realize your long-term dreams, get in touch with a local representative from Vectra Bank. We can work with you on all these concerns to ensure you get the best options for your needs.
*Credit approval required. Terms and conditions apply. See banker for details. Equal Housing Lender. NMLS #467014