Finding the ideal interest rate on your new mortgage could enable you to save possibly tens of thousands of dollars by the time your mortgage is completely paid off. This makes it certainly worth your time to find that good interest rate on a mortgage before you just take the first offer you get.
Mortgage rates change every day, so when you find that the current mortgage interest rates are where you’d like them to be, it is time to lock in your good interest rate with a lender. Be sure that the lock rate period gives you enough time to actually complete the deal. The truth is that right now is probably the best time to get a home mortgage loan because rates may not get any better.
Ensure That You Have a Good Credit Score
A prospective lender is going to base your actual interest rate on your credit score, and a few other things. FICO, the company that created credit score reporting, says that if there are problems on your credit report that you may even be turned down for a mortgage. They also say that you should ask potential lenders what score you need in order to get the best interest rate on a mortgage.
The best home interest rates are given to those with the highest scores. Reuters suggests that you get a credit report at least six months prior to the time you plan to apply for a mortgage, which will give you enough time to make corrections and to allow them to be applied to your report. If your credit score is low, you probably should wait until you can raise it considerably, in order to save a lot of money on a new mortgage by having a good interest rate.
Compare Terms from Several Lenders
The FDIC strongly advises that you compare mortgage interest rates from not only several lenders, but also from different types of lenders. This should include banks, credit unions, mortgage companies, etc. Remember that they are competing against each other for your business, and this means that their rates will vary and some will be lower than others.
In addition to the good mortgage rate, be sure to compare the various aspects of the mortgage, such as fees, points, and whether or not you are going to be required to buy private mortgage insurance (PMI). If PMI is necessary, you may want to wait until you can save up the required 20 percent, in order to get considerably lower payments. Find out what kind of down payment is needed, and be sure to learn whether it is a fixed rate mortgage or an adjustable rate mortgage.
Get a Mortgage for a Shorter Term
Good interest rates may not always differ that much on shorter mortgages, such as a 15-year versus a 30-year, but the overall interest actually paid is tremendous. A shorter term mortgage could save you many thousands of dollars over the lifetime of the mortgage. A potential problem, though, is that your payments are going to be higher.
Even when a mortgage has a good interest rate, it may not mean that it really is the best mortgage out there. Realtor.com advises that you must also consider closing costs and other terms in order to really get the best deal. Low interest rates may blind you to the fact that they have additional fees or higher costs that may actually negate the value of the lower interest rate.