When you’re looking to buy a home, one of the biggest factors of your home’s affordability is your mortgage rate. The mortgage rate is the percent of interest that the lender charges each month to allow you to use their money to buy your house. With the average house price nearing $200,000 in the US, your mortgage rate can have a huge impact on the amount you pay over the life of your loan. So, how do you find the best mortgage rate you can?
1. Improve your credit score.
To get a low rate on your mortgage, you first need to look to your credit score. This score tells your lender how risky it is to lend money to you. The higher your credit score, the lower your risk, meaning you will likely get a lower rate on your mortgage.
2. Know your options.
Get educated about the different types of mortgages that are available, and the benefits of each. For example, a fixed rate mortgage will usually have a higher rate than a variable rate mortgage, but you won’t be susceptible to market fluctuations. At this stage, you’ll want to consider your appetite for risk and whether you’re alright with higher payments if choosing a variable rate.
3. Shop around.
Talk to a number of different banks to compare their rates and mortgage options. Credit unions and online lenders shouldn’t be overlooked either; they may also offer attractive mortgage options that are more flexible than the banks. When shopping around for mortgages, consider using a mortgage broker, who can do the shopping for you. Make sure you’ve accounted for the additional fees that come along with a mortgage, like closing costs, home inspections and legal fees.
When you’re ready to get into the mortgage game, know what type of mortgage you want and your budget. If you’d like a lower rate than what is initially offered, don’t hesitate to ask for what you want. In many cases the best offer available is not disclosed at first, this is all part of the negotiation. Once you’re happy with the rate, lock it in by asking for a written statement of the agreed rate and how long it’s good for. This will give you time to find and close on the house of your dreams.
Getting an exceptional mortgage rate doesn’t have to be difficult! Following the steps above, you’ll be on your way to securing a loan for your house and one step closer to moving in.