With home prices and mortgage rates on the rise, everyone wants to know how they can save a few (or more than a few) bucks on their mortgage payment. When you get pre-approved for a mortgage, your mortgage rate will be estimated and possibly locked depending on when you might close on a home. Of course, everyone wants to get and thinks they deserve the lowest mortgage rate on the market. The mortgage rate you get may be different than your friend or family member that just bought a home because every buyer and lender is different. But, if you want to get the lowest mortgage rate possible, there are a few things you can do. Below are 4 tips for getting the lowest mortgage rate possible in today’s hot housing market.Verify your mortgage eligibility (Aug 12th, 2022)
Tips for Getting the Lowest Mortgage Rate Possible
Improve Your Credit Score
Your credit score will have one of the most significant impacts on your ability to purchase a home and get a low mortgage rate. The higher your credit score, the better. If you are planning to buy a home in the near future, work hard now to improve your credit score however possible. Take a look at it and dispute anything that may be incorrect and negatively impacting your credit score because it can take some time to get those things removed. The higher your credit score the better chance you have at a lower mortgage rate.Verify your mortgage eligibility (Aug 12th, 2022)
Improve Your DTI Ratio
Your debt-to-income ratio, or DTI, will be a major factor in how big of a loan you prequalify for as well as how low your mortgage rate is. If you have a lot of debt compared to your income you may end up with a higher mortgage rate. Pay off as much debt as possible while still maximizing your down payment and it may help you negotiate a lower mortgage rate.
Increase Your Down PaymentVerify your mortgage eligibility (Aug 12th, 2022)
If your down payment is small, you will likely not qualify for the lowest mortgage rate, even if your credit is good. Additionally, you may will likely have to pay private mortgage insurance (PMI) if your down payment is less than 20%. Every little bit counts so the larger your down payment, the more likely you will be to get a lower mortgage rate.
Pay for Points
Some homeowners opt to pay for points so that they can get a lower mortgage rate. This has its pros and cons so it is important to consider if it is worth it for you. NerdWallet provides a helpful explanation of what it means to pay for points, “A point is an upfront fee — 1% of the total mortgage amount — paid to lower the ongoing interest rate by a fixed amount, usually 0.125%. For example, if you take out a $200,000 loan at 4.25% interest, you might be able to pay a $2,000 fee to reduce the rate to 4.125%. Paying for points makes sense if you plan to keep the loan for a long time, but since the average homeowner stays in his or her house for about nine years, the upfront costs often outweigh interest rate savings over time. Alternatively, there are negative points. It’s the opposite of paying points: A lender reduces its fees in exchange for a higher ongoing interest rate. It’s tempting to reduce your upfront fees, but the additional interest you pay over the life of the loan can be significant.”