When you first start looking for mortgage loans, you will be drawn in by the incredibly low interest rates. It doesn’t take long before you figure out that hardly anyone qualifies for the advertised APR. Yet, there are a small amount of people who will actually get these rock-bottom APRs on their interest rates. By making a few precursory actions, you can ensure that you get better rates on your mortgage.
Improve Your Credit
Your credit score is the most important factor in deciding the interest rate you are offered. If you have a very high credit score, then you will look very attractive to the mortgage officers and they will want to draw you in with their best rates. If you have a poor score, then you risk getting denied.
When it comes to mortgage loans, the officers are primarily looking at whether you’ve had any late mortgage payments within the last 1-2 years. The officers will look at how many late payments there were and how late they were. If you have had several payments which were very late, then it may be best to wait a year before you apply for a new mortgage. You can help assuage the negative impact of these late payments by bringing in documents which explain the late payments. Also, bring in evidence which shows that the late payments won’t happen again. For example, if you can show that you have now kept a steady job and have had a pay raise, then it can offset the negative aspects of your credit score.
Never lie or withhold information about your credit or employment history. If the loan officer later finds out this information, it could affect your mortgage rates or exclude you from certain deals.
Discount points usually cost 1% of the loan amount. For each point bought, your interest is usually reduced by 0.25%. It isn’t always smart to buy discount points but, in some cases, they can save you a lot of money in the long run. If your mortgage is going to be for a long time like 15+ years, paying the discount points cost upfront means saving thousands over the course of your mortgage.
Lock Your Rates While You Shop Around
Mortgage interest rates fluctuate by the day depending on changes in the markets. If you find a good interest rate, it may not be available when you go to take it – even the next day! You can typically pay a fee to have an interest rate locked for about 30-60 days. Not all loan officers require you to pay a fee to lock a mortgage rate so make sure you take advantage of this if it is available.