Are you looking for the lowest mortgage rates? A mortgage calculator is an excellent place to start because it allows you to evaluate your mortgage payment and better understand how much property you can buy.
1. Set up your credit.
Credit. Both your credit history and your credit rating have a significant impact on the rate of interest you qualify for, as well as your ability to qualify for a mortgage at all. “Simply, your credit rating enables lenders to assess your potential to repay your loans,” explains Sarah Pierce, sales director, leading online mortgage broker. “The better the rates you’ll be able to acquire, the higher your credit score.”
Taking a look at the most current rates demonstrates this. According to money is probably a study of over 8,000 mortgage lenders, customers with credit scores of 740 or better-received rates as low as 3.096 percent on a July day. Borrowers with credit scores below 640 received the lowest rate of 5.096 percent. On a 30-year, $200,000 loan, that’s a monthly difference of $231 and a total savings of more than $83,000 over the life of the loan. Pierce advises consumers to check their credit score before looking for a home—or a loan. “If you have a lower credit score and a flexible timeline, you may want to wait and try to boost your score before applying to qualify for better rates,” she advises. Paying off debt, clearing late bills, and requesting a credit line increase are all ways to improve your credit score. Checking your credit report and reporting any error may also help, although that can take a while.
2. Save enough for a substantial down payment.
A 20% down payment isn’t required on most mortgage loans, but it certainly can’t hurt when shopping for low rates. This is because a larger down payment reduces a mortgage’s loan-to-value ratio, or how much of the home’s price the lender is financing. In addition, lower LTV loans often have lower interest rates than higher LTV loans since they are less risky for the lender to take on. “Rates reflect risk,” says Joe Tyrrell, chief operating officer of mortgage technology vendor Ellie Mae. “If a homebuyer can put down more than 20%, they will typically get a lower mortgage rate.”
