6 Things You Can Do to Lower Your Mortgage Rate
It's not news to anyone at this point - interest rates have gone up over the last 2 years. So we know how important every possible point you can bring your rate down is. Even though your lender may be advertising a certain rate or quotes you a particular rate to start - it doesn't mean there aren't things you can do to bring that rate down.
Realtor.com recently released 6 crucial steps you can take to lower your mortgage rate.
Increase Your Credit Score & Pay Off Debt
The higher your credit score and the less debt you have gives lenders greater confidence in your ability to pay your loan back. Wondering where to start when paying off debts? Many financial experts recommend you start by paying off the smallest debts first to get them off your plate. Those small debts can add up quickly!
Increase Your Down Payment
As we mentioned above, mortgage lenders evaluate everything by the amount of risk they are taking on. By increasing your down payment, you're decreasing the amount of risk a lender is taking on. Most lenders consider a down payment of 20% or above less risky, which is why on loans with less than 20% down lenders will also require mortgage insurance known as PMI. Lenders may also be willing to come down on your rate if they see you have more cash to put down.
Buy Mortgage Points
You may have seen sellers in the past 2 years offering money to buyers to help them purchase mortgage points to bring down their rate. If you have some expendable cash, you may want to consider using some towards buying points. Points are usually sold in 0.25 increments and cost about 1% of the full mortgage amount.
Look at New Construction
Builders have been offering some fantastic incentives lately - including buying down rates and rate locks! Builders are feeling the shift in the market as well and are much more willing to make deals with potential buyers.
Lenders offer different programs and have different capabilities when it comes to finding ways to reduce your rate. If you're not 100% committed to a lender, we always recommend talking to a few to see what they can do to help your specific circumstances. Need some recommendations? We have quite a few great ones we work with here in DFW!
Choose the Best Loan For You
There are several different loans you can choose from when purchasing your home, depending on how much cash you have, if you are a first-time buyer, etc. We recommend talking with a professional mortgage broker to determine which kind of loan is best for your circumstances. With your credit score and debt-to-income ratio, you might be better off choosing a government-backed loan versus a conventional loan.