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Mortgage rates are slowly beginning to rise and it goes without question that they are still at an all-time low. Industry experts believe that rates are going to continue to increase over the course of the year, which is why now is the best time to lock a loan in now. We have searched out the best ways for you to get an incredible mortgage rate in the coming year.
What Are The Secrets To Getting The Best Mortgage Rate?
Raise Your Credit Score As High As Possible
In most cases, the higher the credit score is, the lower you can expect your interest rate to be. In many cases, borrowers who have a credit rating of 760 or above tend to get offered an APR which is 16 points less than the average rate for individuals with a lower credit rating of 680 and 719 A basis point is equal to .01% and one basis points would equal out to 1%.
In order to raise a credit score, you will need to regularly check it for any errors, reduce the amount of debt you owe, and pay all bills on time. Additionally, you never want to apply to too many lines of credit at one time, especially when you are trying to get a mortgage as this could have a negative effect on your score
Get All Finances In Order
A lender wants to make sure that you are going to have the adequate means to repay a loan, in order for them to do so, they are going to look at more than just your credit score and will examine your overall finances. With this in mind, you should pay down all major debts and have a vivid idea of your entire financial landscape.
You will need to understand your debt-to-income ratio and in most scenarios, lenders are seeking out borrowers who have one that is less than 43% of all assets. You will want to be able to show a viable and secure form of income and be ready to show at least 30 days prior to the loans in pay stubs. For individuals that are self-employed, you will need to provide profit and loss statements in addition to tax returns that show a stable work history.
This particular guide will look in depth into exactly what mortgage lenders are seeking when it comes to your finances and credit scores.
Save For A Down Payment
When you are able to place a larger down payment down it is going to be able to secure a better rate as there is less risk involved with the loan. Additionally, when a higher down payment is placed, you will not have to pay private mortgage insurance which can range anywhere from .05 to 1% of the annual loan amount if you place less than 20% down.
Get Quotes From Multiple Lenders
It is best to get quotes from three to five lenders and see which one is going to be able to offer you the best interest rate as well as fees and points in regards to your mortgage. It is essential to look over points, fees, closing costs, and tax credits. This can become rather overwhelming, so if you happen to have a financial planner, it is well worth using them through this process.
Try to take a day and gather all of the quotes. Rates are going to fluctuate on a daily basis and all lenders have the ability to offer you their best rate during a simple discussion.
Lock In The Rate
When you lock in a rate early, it will mean that the lender is unable to raise the interest rate from the time you apply for a loan and when you are approved. With this in mind, if the market should increase or decrease during the application procedure, you are going to be saved from having to pay the higher interest rates.
Understand The Pros and Cons Of Buying Points
Discount points are those fees that borrowers will pay upfront in an effort to help reduce the rate of the mortgage. Generally, one can expect one point to equal 1% of the mortgage amount and that each point will lower the interest rate of the loan by one-eighth to one-quarter of a percent.
The lowest rates on the market are generally going to include mortgage points, a certain amount of equity, as well as specific requirements. However, it is not always worth your while to buy discount points as the breakeven point on them may be several years down the road. If you do not plan on staying in the house for a number of years, they are not going to be worth it.
First Time Home Buyer Programs
There are a number of aid programs available for first time homebuyers that will offer up funds for downpayments, repairs, as well as other situations in order to lure prospective buyers into particular areas. States such as Florida, California, New York, and Illinois have a number of unique programs that are designed to help lower costs of a new mortgage and even feature tax credits to be used. Some of the more common loans for individuals with lower credits and smaller downpayments include VA loans, USDA loans, as well as FHA loans.
Shorter Term Loans
Short term loans such as a 15 year loan will generally offer better terms than that of a 30 year loan. Lenders are always going to price loans based on the risk involved with them. If a loan can be paid off faster at a higher payment, there is going to be less risk involved with the loan.