Five Steps to Secure a Low Mortgage Rate

Securing a Low Interest Rate

Many borrowers think that just because they have perfect credit they will automatically get the lowest possible mortgage rate. However, this is not always the case for a number of reasons. Before agreeing on any mortgage, there are some simple things that you can do to make sure you get the lowest mortgage rates available.

Get your credit report

Before applying for a home purchase mortgage or a refinance mortgage, request your free credit report. Your credit report will help you identify any weaknesses that a lender can use to increase your rate. Be sure to review your report carefully for any errors and address them immediately.

Shop around

Before accepting any loan, make sure that you shop around and make sure that you are being offered the lowest rate. Direct lenders will typically be able to offer a lower rate than a mortgage broker and in some cases, credit unions and community banks may be able to offer a lower rate than a large bank. Know where the lowest rates are available and proceed accordingly.

Know what is included

Mortgage interest rates often include some “hidden” items such as mortgage broker payments, loan lock fees and premiums to avoid pre-payment penalties. Make sure that you discuss with each lender what the base fee is and what the APR (annual percentage rate) is on the loan so that you know what is “hidden” inside the rate.

Understanding loan programs

Various loan programs such as FHA or FNMA may offer borrowers a lower interest rate, lower down payments and other benefits. Make sure that your lending institution is offering you the best loan program for your individual needs. Sometimes paying a slightly higher rate of interest may mean a better loan in the long run.

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Higher down payment

Borrowers who are able to put down a larger down payment may qualify for a lower interest rate. Lenders who have to take less risk are sometimes willing to negotiate a lower rate. Generally speaking, a 30 year loan with a five percent down payment will mean a higher interest rate than a 30 year loan with a 20 percent down payment.

Loan terms matter

Just as the down payment may impact interest rates, the term of the loan may matter as well. Generally, a 20 year loan will have a lower interest rate than a 30 year loan. Ask the lender to calculate various scenarios for fixed rate and adjustable rate loans to determine which offers the best terms.

While some borrowers may qualify for a low interest rate, some are hesitant to negotiate with a lender for a lower rate. In addition to exploring adjustable rate programs which are typically lower than fixed rate programs, consumers should take the steps necessary to make sure they are getting the lowest rate they are qualified for based on their credit and personal circumstances.

For additional tips on securing a low interest rate mortgage as well as new home builder reviews such as this Orlando real estate for sale visit the California Apartments Blog.

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