5 Tips for Lowering Your Interest Rate
Many buyers have a misconception of how mortgage lending works, especially when it comes to interest rates. Some think that the interest rate quoted by the first lender they speak to is the rate they'll get across the board, so they just settle.
In truth, that's not actually the case, and rate shopping is an essential part of selecting the right mortgage for your needs. Getting lower interest rates is possible if you go about it in the right way. Qualifying for lower rates can save you thousands of dollars in interest and get you out of debt sooner. Even if you have excellent credit, you still need to shop around to find the best rates, and that can take some serious effort. Here are a few tips for lowering your interest rate.
1. Request Your Credit Report
You will need a credit score of more than 720 to get the best interest rates. Ideally, your credit report should be free of bankruptcy, collections or other serious delinquencies. Dispute any information on your credit report that is inaccurate. Correct any major problems with your credit before applying for a loan. Borrowers with better credit ratings get lower interest rates.
2. Put Money Back
Lower the amount of interest you pay on a loan by putting more money down. It pays to save until you have a significant down payment before applying for a home loan. Aim to save more than 20 percent of the total amount you need for the purchase. A larger down payment will result in a better interest rate, since you will have more equity at the start.
3. Lock It In
When you're promised a "rate lock" from the lender, it means that you are guaranteed to keep a specific interest rate for a certain number of days for your application process. This keeps you from going through your whole application process and finding out at the end that the interest rate has gone up. Rate lock periods can vary in length, anywhere from fifteen to sixty days, with the longer ones usually costing more. A lender may agree to lock in an interest rate and points for a longer period, like sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
4. Pay Points
You can pay points to improve your interest rate for the life of the loan, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to reduce the interest rate over the term of the loan. You pay more initially, but you will come out ahead, especially if you keep the loan for the full term.
5. Make Additional Payments
Make additional payments which go toward the principal. People pay extra in a few different ways. Paying one additional full payment one time a year may be the easiest to track. If you can't afford to pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Finally, you can pay half of your mortgage payment every other week. Each option yields slightly different results, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.
Let's Chat!
When it comes to mortgage lending, you can rely on MHQ Mortgage to provide you with the information you need to make an educated decision. So, when you're ready to shop mortgage options and need to know more about interest rates, we've got your back. Mortgage Headquarters of Missouri, Inc can get you past the pitfalls of getting a mortgage. Call us: (573) 302-9990.
Mortgage Headquarters of Missouri, Inc
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
NMLS # 1229111
In truth, that's not actually the case, and rate shopping is an essential part of selecting the right mortgage for your needs. Getting lower interest rates is possible if you go about it in the right way. Qualifying for lower rates can save you thousands of dollars in interest and get you out of debt sooner. Even if you have excellent credit, you still need to shop around to find the best rates, and that can take some serious effort. Here are a few tips for lowering your interest rate.
1. Request Your Credit Report
You will need a credit score of more than 720 to get the best interest rates. Ideally, your credit report should be free of bankruptcy, collections or other serious delinquencies. Dispute any information on your credit report that is inaccurate. Correct any major problems with your credit before applying for a loan. Borrowers with better credit ratings get lower interest rates.
2. Put Money Back
Lower the amount of interest you pay on a loan by putting more money down. It pays to save until you have a significant down payment before applying for a home loan. Aim to save more than 20 percent of the total amount you need for the purchase. A larger down payment will result in a better interest rate, since you will have more equity at the start.
3. Lock It In
When you're promised a "rate lock" from the lender, it means that you are guaranteed to keep a specific interest rate for a certain number of days for your application process. This keeps you from going through your whole application process and finding out at the end that the interest rate has gone up. Rate lock periods can vary in length, anywhere from fifteen to sixty days, with the longer ones usually costing more. A lender may agree to lock in an interest rate and points for a longer period, like sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.
4. Pay Points
You can pay points to improve your interest rate for the life of the loan, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to reduce the interest rate over the term of the loan. You pay more initially, but you will come out ahead, especially if you keep the loan for the full term.
5. Make Additional Payments
Make additional payments which go toward the principal. People pay extra in a few different ways. Paying one additional full payment one time a year may be the easiest to track. If you can't afford to pay an extra whole payment all at once, you can split that large amount into 12 smaller payments and write a check for that additional amount monthly. Finally, you can pay half of your mortgage payment every other week. Each option yields slightly different results, but they will all significantly shorten the length of your mortgage and lower the total interest paid over the life of the loan.Let's Chat!
When it comes to mortgage lending, you can rely on MHQ Mortgage to provide you with the information you need to make an educated decision. So, when you're ready to shop mortgage options and need to know more about interest rates, we've got your back. Mortgage Headquarters of Missouri, Inc can get you past the pitfalls of getting a mortgage. Call us: (573) 302-9990.
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065
Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
NMLS # 1229111
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