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How To Get The Best Mortgage Rate: Expert Tips

4-Minute Read
Published on December 4, 2020
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When you’re looking to buy a home, securing a mortgage with the best terms should be a top priority. Although the current mortgage rates will vary based on market conditions, you’re likely wondering how to get the best one.

After all, why wouldn’t you seek out the best possible rate? A lower rate could save you thousands over the course of your loan.

Luckily, you can find the best mortgage rate available with a little bit of legwork. Here’s a quick look at some of the ways you can make this happen.

  • Get your credit score in shape
  • Pay down your debts
  • Save for a bigger down payment
  • Consider an ARM or a shorter term
  • Think about buying discount points
  • Research first-time home buyer programs
  • Compare lenders

We’ll take a closer look at each of these strategies today.

Apply for a Mortgage with Quicken Loans®

Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

Start Your Application

Get Your Credit Score In Shape

It’s no secret that a good credit score can help you throughout the mortgage process. With a better credit score, you’re likely to receive offers with the best loan terms. You can find lenders willing to work with less than ideal credit scores. But you’ll likely face a higher interest rate if you have a lower credit score.

With that in mind, making an effort to improve your credit score prior to applying for a mortgage is a good idea. Since a credit score indicates your creditworthiness to the lender, taking some time to get yours in shape can have a major payoff.

A few good ways to give your credit score the boost it needs is to get a secured credit card, become an authorized user on a credit card, and pay your bills on time. Even a small improvement to your credit score could make a big difference.

Pay Down Your Debts

When you have a high debt burden, lenders may be unwilling to offer you the best mortgage rates. That’s because a lender will look at your debt-to-income ratio, which is the percentage of your income that you spend on monthly debt payments.

Lenders take your DTI into consideration when preparing a loan offer. If a big percentage of your income is servicing current debt payments, the lender may question if you can handle a mortgage. With that, you’ll be facing a higher mortgage rate.

If you have a high DTI, then you should take action and pay down your debts. The less debt you have on your books, the better. In most cases, lenders will be looking for a DTI of 35% or lower. Keep that in mind as you build a strategy for debt repayment.

Save For A Bigger Down Payment

As you prepare for your home purchase, building a bigger down payment can help in many ways. First and foremost, you’ll likely find a lower interest rate if you’re able to make a bigger down payment. Plus, you’ll be able to avoid costly PMI if you put down at least 20%.

On the flip side, saving a bigger down payment can delay your home buying dreams. Take a minute to weigh the advantage of a lower interest rate against the time you’ll need to save for a larger down payment.

Consider An ARM Or A Shorter Loan Term

The term of the loan can affect your interest rate in a major way. If you decide to go with an ARM or short-term fixed-rate mortgage, you’ll gain access to lower interest rates.

Before you move forward with an ARM, or adjustable rate mortgage, consider the long-term costs. With an ARM, the interest rate will adjust over time based on ever-changing market conditions. In most cases, the initial interest rate, or teaser rate, is set for a predetermined number of years. After that initial period, it will adjust for the remainder of the term. The downside to an ARM is that you might find yourself facing significantly higher interest rates later in the loan.

Another option is to pursue a shorter loan term for a fixed-rate mortgage. The most common option is choosing a 15-year mortgage over a 30-year mortgage. With a 15-year term, you’ll typically find lower interest rates because the lender is expecting to receive their money back more quickly.

Although the lower interest rate of a 15-year mortgage can be tempting, it will come with significantly higher monthly payments. If you can easily afford the higher monthly payment, then a lower interest rate may be worth it. If you want to build more flexibility into your monthly budget, a 30-year mortgage can provide a lower monthly payment. But you’ll be facing a higher interest rate.

Apply for a Mortgage with Quicken Loans®

Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

Start Your Application

Think About Buying Mortgage Points

Mortgage points can offer a way to lower your interest rate. If you plan to own the home for decades with a long-term mortgage, then mortgage points can be worthwhile. But buying points isn’t always the best solution.

If you plan to live in your house for just a few years, then paying extra closing costs is usually not the right move. Or, if you want to boost your down payment to 20% in order to avoid PMI, that’s likely a more valuable option than buying mortgage points.

Research First-Time Home Buyer Programs

If you are a first-timer, then you should take a look at the first-time home buyer programs available. In many cases, you’ll find opportunities to secure a better interest rate.

The good news is that there are several first-time home buyer programs to choose from. But it can be a challenge to figure out which program is right for your situation. If you need help, chat with our experts.

Compare Lenders

As with all loans, it’s critical to compare lenders before moving forward with a particular loan. You might be surprised to find a range of interest rates.

Before you dive in with the lowest interest rate offered, make sure to consider any fees involved. Plus, decide if you’re comfortable with the lender’s communication style. Both are important factors to consider before finalizing the loan.

Final Thoughts On Getting The Best Mortgage Rate

The home buying process can be an exciting time that marks a new chapter in your life. Every borrower has different strengths and financial goals. With that, you can implement the strategies that are appropriate for your life.

Not sure how to get started? Speak with a Home Loan Expert to guide you through the process!

Apply for a Mortgage with Quicken Loans®

Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

Start Your Application

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