Getting the best mortgage rate involves a lot of things and not just the comparison of popular lenders. After decades of falling, mortgage rates may actually be on their way back up. There are a number of factors that can influence your monthly payment. We will go through them and help you complete this process in a couple of weeks.
FICO credit score
Boosting the credit score is the best way to reduce costs and save money on any type of financing. Regardless of your investment, a good score can help you save thousands of dollars throughout the years. When it comes to FICO, a score of 760 or higher and provides you with the best mortgage rates.
What can you do to improve the score?
• Pay your bills on time
• Pay off the remaining debt
• Don’t apply for new credit cards
Balance mortgage amount and property price
The price of the property, as well as the amount financed, can significantly affect your mortgage rates. Therefore, mortgage loans include three main categories:
• Comforting – loans less than $424,000
• Super comforting – loans less than $636,150
• Jumbo – loans that exceed the two previously mentioned categories
The location of your home
Buying the property in the expensive areas will determine the amount of your mortgage, and it usually falls into a super comforting category. However, if you switch to jumbo, your rates will be lower. The same goes for rural areas.
For that reason, it’s best to compare the conditions among various lenders and see what they have to offer.
Think about down payment
Lenders tend to avoid risks at all costs. The more risk you make them take, the bigger your interest will be. For example, will the lender feel more comfortable if you put 5% of down payment or 20%? Bigger down payment means the bank is more likely to get their money back.Also, when you put 20%, you get to bypass high-interest rates, as well as private mortgage insurance.
When lenders assess risks associated with your application, they can offer you various terms and conditions, depending on your situations.
In this case, short term loans will have a low-interest rate compared to long term ones.
For example, if you decide to take a 15-year mortgage, you can save a significant amount of money, even though your monthly installments will be higher. This is something to consider when applying for a loan.