If you're planning on buying a home soon, or are already in the process, one of the most important steps is purchasing a mortgage. In fact, if you are serious about buying a home, looking into your mortgage options is probably the first thing you should check off your list. Too often, eager home buyers neglect to search for the best rate possible. Skipping this step and going with the first option that you find can end up costing you a lot of money in the end. There are many factors that go into your rate that you can't control, but there are also ways for you to ensure that you're getting the best mortgage rate possible.
Here are a few of the factors that you can control:
One major aspect that you can control when it comes to getting the best mortgage rate is ensuring that your credit score is in tip-top shape. Lenders use your credit score to predict how reliable you will be in paying off your loan. The general rule of thumb is the higher your credit score, the lower the interest rate. If you're looking into purchasing a home, be sure to look into your credit score range as soon as possible and take action if needed. There are many ways to boost your credit score before you purchase a mortgage (and we can help you with that).
Another factor in your rate is your down payment. The higher your down payment is, the lower your rate will be. This is why people typically like to to build a strong savings before they look into buying a home. Typically, 20-percent or more for a down payment can keep you at a lower rate. If your down payment is lower than 20-percent, you're going to be facing higher interest rates. If you are in a situation where you can only put down less than 20 percent, we do offer a number of loan options that'll still make your mortgage affordable.
Loan Type and Term
When you're shopping around for your mortgage, keep in mind that the type of loan that you choose may affect your rate. Rates can be significantly different depending on the type of loan that you choose. Loan term is another big factor. Typically, shorter-term loans have lower rates and lower costs, but higher monthly payments. If you can afford the higher payments each month, you may choose a shorter-term loan so you can ensure that you're getting a lower rate. However, you don't simply want to pick the option that has the lowest rate. Be sure to shop for a mortgage and weigh all aspects of your loan type, term, and rate before making a decision.
You may be thinking, "What do closing costs have to do with my rate?" When you're shopping around for a mortgage, you may notice that some companies raise closing costs in order to lower rates. While you may be initially attracted to the very low rate in front of you, it's really just being tacked on to the closing costs that you have to pay for in the end. At Poli, we have the ability to provide low rates AND low closing costs. There are no cutting corners to provide the best mortgage rate possible. If you find a rate that seems too good to be true, you may be paying for it in your closing costs.
The only way to know if you're getting the best mortgage rate possible is to be prepared, shop around, and compare. While some rates may be initially attractive, you should consider all of the elements that go into your rate before making a decision.
Want to learn more? Contact us and speak to one of our experienced loan officers!