One key to getting the lowest rate on your home loan is to compare lenders. By comparing mortgage proposals from different lenders, you will have a range of loan options, which will then put you in a stronger position for negotiation. It may take time to do some comparison shopping, but this can help you save thousands over the life of the mortgage.
Apart from comparing loan proposals, here are a few other ways to save and get a low rate.
Review Your Credit Score
The Mortgage Partner Inc. says mortgage and loan providers in Utah note a high credit score will allow you to receive a low rate from your lender. The score requirement varies but you may need to have a minimum credit score of 700 to 720. It is best to review your credit score six months to one year before you begin the home loan process. This is to receive the lowest rates and avoid surprises when you apply for a mortgage.
Make a 20% Down Payment
With a minimum down payment of 20%, your loan-to-value (LTV) ratio will be 80%. LTV is the ratio of the loan amount to the value of the house you are buying. While it is possible to buy a home with less than 20% (3%, 5%, or even no down payment), you are likely to have high-interest rates or pay private mortgage insurance (PMI). You need to pay this additional fee to protect the lender in case you default on the mortgage.
Think of a Shorter Term
The length of your mortgage affects your payment and interest rates. A shorter-term loan has lower interests, but comes with a higher monthly mortgage payment. This is because you are paying off the home loan in a shorter amount of time. If you’re comfortable with this setup, you may choose a 15-year term over a 30-year loan to reduce the total interest expense you pay over the life of the loan.
Buying a home is a big financial commitment so it is a good idea to get the lowest rate possible. Do everything you can to be an ideal candidate to get a fast approval with low-interest rates and monthly payment.