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Mortgage rates are sitting near historic lows, which means if you sign up for a home loan today, you might spend less money on interest than you normally would. Here’s how to lock in as low a rate as possible on a home loan.

  1. Have a high credit score -Your credit score speaks to how reliable a borrower you are. The higher your score, the more comfortable mortgage lenders will probably be working with you. As a general rule, once your score reaches the mid- to high-700s, you’re in a good position to snag the lowest rate a given lender has to offer. If your score could use some work, there are things you can do to improve it quickly. First, if you’re able to, pay off some or all of your existing credit card debt, because the more of that debt you have, the more it can negatively impact your score. Next, check your credit report for errors. If there’s a mistake on there that’s bringing your score down, like a delinquent debt you’ve already paid off, getting that error corrected could bring your score up.
  2. Get a shorter-term loan – Mortgage lenders generally reward borrowers who take out shorter-term loans with lower interest rates. No matter your credit score, you’re pretty much guaranteed to snag a lower mortgage rate with a 15- or 20-year loan vs. a 30-year loan. The downside to taking out a shorter-term loan is having higher monthly payments. If those don’t fit into your budget, a 15- or 20-year loan may not be an option. 
  3. Make a higher down payment – Sometimes, lenders reward borrowers who put down more money at closing with lower interest rates. If your lender only requires a 10% down payment but you can come up with 20%, you might get a break on your loan’s interest rate in the process. Regardless, it’s a good idea to try to put down 20% on your home to avoid private mortgage insurance, a costly premium that can make your housing payments more expensive. The lower the interest rate on your mortgage, the lower your home loan payments will be each month. Also, the lower that rate, the less money you’ll spend on interest throughout the life of your mortgage. 

Unfortunately, interest rates won’t stay put at this all-time low for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase, making these moves will  increase your chances of ending up with a mortgage rate you’re happy with.

If you are having trouble making your mortgage payments or behind in your mortgage contact us today for a free evaluation on whether you are eligible for a loan modification.