Tips And Advice To Help You Lock The Best Mortgage Rate

By Alvaro Moreira
6 min read

Shopping around is the first and foremost thing you need to do, if you want to find the best mortgage rate on the market. Nevertheless, there are other methods to lower the mortgage rates from various lenders you reach out to.

mortgage rate

Improve Your Credit Score For The Best Mortgage Rates

Try to improve your credit score before applying for a mortgage. See if there’s anything you can do to boost your credit score prior to buying a home or refinancing an existing mortgage. The mortgage rate you are eligible to get depends directly on your credit score. Even a few points can make a huge difference when it comes to saving money on your mortgage.

The More You Pay Upfront, The Better The Mortgage Rate

Make use of discount points, whenever possible. The more you can pay upfront, the better your mortgage rate over the lifespan of your loan. Should you intend to keep your home for a long time, you’d better consider this opportunity to lower your mortgage rate. About 1% of your loan would buy you one discount point that would lower your rate by 0.25%.

Negotiation Skills!

Hone your negotiation skills and put them to good use. Believe it or not, most lenders are open to negotiation. Think about the fact that they do want your business. Moreover, they have the flexibility to offer their clients better rates than the ones they advertise. As a general rule, by showing a lender that you’ve got a better offer from one of their competitors, you’ll be able to negotiate your mortgage rate to a certain extent.

Negotiate your closing costs. While you won’t be able to negotiate your credit report fees and your third-party appraisals, you’ll still be able to discuss and maybe lower your lender’s fees. This should save you a nice amount, if you are persuasive enough to convince the lender to charge you less for their services.

Watch For The Best Moment To Lock Your Mortgage Rate

If you’ve followed the market for a while, you probably know that mortgage rates move up and down every day. If you want to get the best deal possible, keep an eye on these daily adjustments, in order to seize the perfect moment to lock in your loan. Even though asking for mortgage quotes isn’t the most pleasant thing to do, it may pay off big time, provided that you manage to land a great deal. You could save thousands with only a few hours of work.

According to a fairly recent study, you can save up to $300 per year by doing nothing else but comparing three quotes before making your choice. Savvy shoppers could save even more, provided that they are willing to put in the time to ask for multiple quotes.

Lowest Mortgage Rates FAQ

What are the more recent mortgage rates?

Over the past two years, mortgage rates have decreased from around 4 percent to as low as 2 percent, and even lower. Currently, the best mortgage brokers offer rates that revolve around 3 percent. This is an unbelievable low rate, if we take into consideration the historical average of 8 percent of fixed-rate 30-year mortgages.

What would be a fair mortgage rate?

From a historical point of view, anything lower than 4 percent is good. Currently, you may find rates between 2 and 3 percent. Keep in mind that only strong borrowers with stellar credit scores, low debt, and at least 20 percent down payment are able to score the lowest mortgage rates on the market.

Which lender has the best mortgage rates?

We’ve analyzed the 40 best lenders and we’ve come to the conclusion that Freedom Mortgage, Better Mortgage, Citibank, Guild Mortgage Company, and American Financial Network offer the best rates. We’ve based our study on 30-year mortgage rates from the latest period available (namely year 2020). Nevertheless, mortgage rates are personal, so your best one may come from another lender. This is why you should always ask for personalized quotes before making a choice. 

How can I compare current mortgage rates from different lenders?

If you don’t want to apply for a loan just yet, you can simply use online rate comparison websites to get a good understanding of the market for such offers. On the contrary, if you want to apply and choose a lender as soon as possible, you’ll need to send out between three and five applications to different companies. Lenders are required by law to provide you with a custom quote within three days from completing and sending out the application. As all of these loan estimates will be in a standard format, you’ll find it very easy to compare them side by side. You’ll see everything at a glance, from loan terms and interest rates to closing costs, APR and other fees that are attached to each of these loans.

What type of mortgage loan should I choose?

That depends on your specific credit history. If your credit score is very good and you’re willing to go for a 20 percent down payment, you’d probably need to choose a conforming loan. If you want to buy a very expensive house, however, you may need to apply for a jumbo loan to afford such a price. If your credit history isn’t exactly stellar, you may want to apply for an FHA loan, as it has more lenient conditions. Such loans are backed by the Federal Housing Administration. Other types of loans include VA loans, and USDA loans. If you’re a first time home buyer, you should ask your loan officer to support and guide you in order to make the best choice for your specific financial situation.

How should I choose my mortgage lender?

First of all, you have to decide what kind of mortgage you’d want to get. Then, you have to find lenders that offer the type of loan you need. Next, you should narrow down your selection by asking your peers or some real estate agents for recommendations. Your goal should be to narrow down your list to 3-5 names and to compare their rates and their loan terms to find the one that best suits you.

How do lenders calculate my mortgage rate?

Mortgage rates depend on a wide array of factors such as your credit score, your credit history, your down payment, and your debt-to-income ratio. Your lender will work together with you to find the best type of loan for you. This choice will have a direct impact on your mortgage rate. Besides, the overall mortgage rates depend on the broader US economy, as well. Current mortgage rates are low because of the pandemic that has induced economic uncertainty.

Will my down payment affect my mortgage rate?

Most probably, yes. The more you can pay upfront, the lower your mortgage rates. This is valid when it comes to conventional loans that aren’t backed by the government. Your down payment will also influence your monthly installments, and therefore your home ownership costs and your living standards. If you’re willing to pay at least 20 percent upfront, you’ll be able to avoid private mortgage insurance. This should save you at least $200 per month.

Are jumbo mortgages more expensive?

Jumbo loans are “non-qualified” mortgages and their interest rates may be slightly higher than the ones of conforming loans. Nonetheless, the rates depend directly on your financial situation, so you should ask for custom quotes to see how much you’d need to pay for getting a jumbo loan.

Is it better to get a fixed-rate mortgage or an adjustable-rate one?

Fixed-rate mortgages offer you stability and safety. Adjustable-rate ones may seem more appealing in the beginning, but they can increase a lot afterwards, putting you in difficulty because of the high monthly payments.

Is it wiser to get a 30-year mortgage or a 15-year one? 

This depends on your financial situation. Many people go for the 30-year mortgage choice, because they want lower monthly payments. However, if you can afford the higher monthly payments of 15-year mortgages, you’d lower your total interest.

What are the latest mortgage rates?

Current mortgage and refinance rates are still extremely low. This is a good time to buy a new home or to refinance an older mortgage. Just do your homework to save as much as possible on your new loan.