How do I get the best mortgage rate?

Buying a home is a huge financial decision, and getting the best mortgage rate can save you thousands of dollars over the life of your loan. But how do you make sure you’re getting the best deal? Let’s break it down!

What is a Mortgage Rate?

A mortgage rate is the interest rate you pay on the money you borrow to buy a house. It’s kind of like the cost of renting that money from the bank or lender. The lower the rate, the less you’ll pay in interest over time.

Think of it like this: if you borrow $200,000 at a 4% interest rate for 30 years, you’ll end up paying around $344,000 in total (including the original $200,000 loan). But if you get a 3% rate, you’ll only pay around $292,000 – that’s a savings of over $50,000!

How to Get the Best Rate

Now that you understand the importance of a good mortgage rate, let’s talk about how to get the best one possible.

Shop Around

The first step is to shop around and compare rates from multiple lenders. Don’t just go with the first offer you get – rates can vary significantly between banks, credit unions, and online lenders.

• Surprising Fact: Did you know that getting just one additional quote can save you an average of $1,500 over the life of the loan? And getting five quotes can save you around $3,000!

Improve Your Credit Score

Your credit score is one of the biggest factors that lenders look at when determining your mortgage rate. The higher your score, the lower the rate you’ll qualify for.

• Tip: Check your credit report for any errors and dispute them. Even a small increase in your score can make a big difference in the rate you get.

Put Down a Larger Down Payment

Lenders see a larger down payment as less risk, so they’ll often offer better rates to borrowers who can put down 20% or more.

• Surprising Fact: Putting down 20% instead of 10% can lower your rate by 0.25% or more!

Consider Points

You may have the option to pay “points” upfront, which are fees that allow you to buy down your interest rate. One point typically costs 1% of the loan amount and can lower your rate by 0.25%.

• Surprising Fact: Paying points can make sense if you plan to stay in the home for several years, but it may not be worth it if you’ll move sooner.

Learn More

• Mortgage Types: Understand the differences between fixed-rate, adjustable-rate, and other mortgage options.
• Closing Costs: Learn about the various fees and expenses you’ll need to pay when closing on your home.
• Home Buying Process: Get a step-by-step guide to the entire home buying journey, from pre-approval to closing.

Remember, getting the best mortgage rate takes some effort, but it can save you a ton of money in the long run. Happy house hunting!