How to Get the Best (Lowest) Mortgage Rate

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How to Get the Best (Lowest) Mortgage Rate

Are you wondering how to get the best mortgage rate? If you said yes than you have found the right article. Almost all homebuyers wonder how they can get the best mortgage rate. Did you know that by following a few easy steps you can maximize your opportunity to get a really good interest rate for your mortgage.
Getting the Best Mortgage Rate – The Down Payment Amount
The size of the down payment you plan to make will affect your mortgage rate. The higher the down payment, the lower your interest rate will be (within limits). Speak to your loan agent and ask them to give you details about how your interest rate will change if you put down a larger percentage of the purchase price.
Remember, if you put down less than 20% of the home purchase price you will have to pay PMI (private mortgage insurance) monthly. To get around this you may be offered a loan package that includes a primary mortgage and one or two home equity loans. The equity loan(s) is/are always at a higher interest rate.

Getting the Best Mortgage Rate – Understanding Points
If you are trying to get the best mortgage rate you need to understand what points are and how points impact your interest rate. A mortgage point is equal to 1% of the mortgage amount. For example, if you are buying a house and getting a loan for $200,000, one point is equal to $2,000.
Mortgage lenders will likely offer you the opportunity to buy down your interest rate. The way this is works is you pay one or more points and get a lower interest rate. This is often a good idea for homebuyers planning to live in the home for at least 3 – 5 years.
To determine if this is a good deal for you, ask your lender to see what your mortgage payments will be based on the different interest rates being offered. Since you need to pay the points at or before closing you want to look at the overall opportunity and make a decision on whether or not to pay points for a lower mortgage rate.

Getting the Best Mortgage Rate – Your Credit Score
Your credit score (and any co-borrower’s credit score) has a significant impact on the mortgage rate you can receive. Make sure you review your credit reports (from all 3 major credit bureaus) and have mistakes and/or problems removed. The better your credit report looks the more likely it is that you will get a lower mortgage rate.

Getting the Best Mortgage Rate – Locking-In Period
Homebuyers trying to get the best interest rate need to understand the lock-in period and process. Virtually all lenders will give homebuyers the opportunity to lock-in their mortgage interest rate. Basically, by a date specified in the mortgage documents you need to lock-in your interest rate. You will want to check every day and see what the interest rate is that day. When you reach a day you think is the best day to lock-in your loan you should do so.
The period of time you have to lock-in your mortgage rate and the process for locking-in will vary from lender to lender. Speak to your loan officer about this and ask if there are any fees to lock-in or to extend the lock-in period.

Following these basic steps will help you get the best mortgage rate.

This article is intended for general information. Always seek sound financial and legal advice before making any financial decision.

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