Tips to Securing the Finest Interest Rates for Long-Term Mortgage Loans
When it’s time to get a mortgage, the interest rate can make a huge difference in how much is paid for the home over the life of the loan. Since the interest rate can have a big impact, it is important to get the best rate possible. Those who are interested in buying a home soon may want to use the following tips to help decrease their interest rate and get a much better deal.
Increase Credit Score
The biggest tip for buyers who are worried about interest rates on a 30 year mortgage is to improve their credit score. Lenders will take a look at the buyer’s credit score to determine how much of a risk they are, so not only can a low credit score mean the risk of not being approved, but it can also increase the interest paid on the mortgage. Paying off old debt and taking steps to increase the credit score can help reduce the interest rate for buyers.
Be Prepared to Pay a Larger Down Payment
The larger the down payment is, the smaller the mortgage will be. For lenders, it’s possible to offer a lower interest rate for a smaller mortgage.
Prospective buyers may want to take the time to save more money so they can put more down when they purchase the home. Since the loan will end up being smaller, they may end up qualifying for a much smaller interest rate. This can help them save money in the long run, even though they pay more cash upfront when they buy the home.
Show that Employment is Stable
Mortgage lenders will want to make sure the person has stable employment before they are willing to lend money. On top of this, if the person can’t show they have stable employment, the interest rate may increase to cover the higher risk of the loan. Those who are ready to buy a home will want to make sure they can provide proof of employment and income, even if they’re self-employed.
It is better to wait until after getting a new job or starting a new business to build up the history before applying for a mortgage to get a lower interest rate.
Ask About Purchasing Points
Another option buyers can consider is asking to buy points. Most lenders will offer this, which makes it easier for buyers to get a lower interest rate when they purchase a home. Buyers are able to purchase mortgage points that can help to reduce the interest rate by .25%. In most cases, the point costs about 1% of the total loan, so depending on how long the person is going to stay in the home and how much they want to spend upfront, they may be able to reduce the interest rate significantly and pay less over the life of the loan.
If you’re ready to buy a home, consider the tips here before applying. Taking the time to go through them can help reduce the interest paid over the life of the loan, which can help you save a significant amount of money in the long run. Talk to the lender to learn more about interest rates and what you can do to get it as low as possible.
