6 Tips for Bringing Down Your Mortgage
Being a homebuyer right now can feel like being on a rollercoaster! Depending on where you live, the market may have been really hot, and prices may have gone up significantly. Maybe where you live, things went up, but are settling down a bit. And then there are mortgage interest rates. We have seen a significant increase in interest rates in 2022, so doing everything you can to get the lowest rate possible is more critical now than ever. In addition, seeing an advertised interest rate or getting an initial quote from a lender does not mean you can't get the rate down. Read on for more details!
Raise Your Credit Score and Pay Off Outstanding Debt: Your credit score can make a huge impact on what interest rate you're offered when buying a home. In addition, paying off as much debt as possible lowers your debt-to-income ratio, which is something lenders like to see. Paying off old debt can also help raise your credit score! This helps show lenders you are a qualified borrower.
Make A Larger Down Payment: In general, lenders typically consider potential borrowers who put 20% or more down on a home to be a safer bet. Loan officers may be willing to come down some on the rate to buyers who are able to put down extra cash.
Buy Mortgage Points to Lower Your Rate: Another thing borrowers with extra cash can do is to buy mortgage points to bring down their rate. This is where the borrower pays the lender a fee to buy points, which in turn brings down their mortgage rate. Typically, points are sold in 0.25% increments and cost about 1% of the full mortgage amount, although that can vary.
Consider New Construction: Some home builders may be willing to buy down mortgage rates to incentivize would-be buyers. Many builders are now willing to cut a deal, and that may mean offering a lower interest rate.
Make Lenders Compete for Your Business: Lenders have less business than they did a year ago, so use it to your advantage by shopping multiple lenders and making them compete for your business! Don't be afraid to pin lenders against each other to get yourself the best possible deal.
Shop Around for the Best Kind of Loan for You: They are a variety of different loan types, and there may be pros and cons to each. Since no one's situation is the same, it is important to check out the different loan options and see which one makes the most financial sense for you.