Mortgage Interest Rates Explained
How to Get the Best Mortgage Interest Rates
There are many things to consider when buying a home. Not only do you have to worry about location, price, and features, but you have to consider mortgage interest rates. A difference of a fraction of a percentage can lead to paying thousands of dollars more over a 30-year period. We’ve got some tips to help you secure the best mortgage interest rates for your situation.
Getting The Best Interest Rates
The key to getting the best mortgage interest rates is proving to banks that you are worth the money you are asking. The banks do not make any money if the don’t lend out money; however, they don’t want run the risk of you not paying the money back so they are selective about who they lend to.
To prove to the banks that you are worth the risk of lending money, you should consider the following:
A Large Down Payment
Cash just seems to be something that most buyers don’t have much of these days. In the previous years, it took a 20% down payment to get a mortgage. Today, a 20% down payment is not the standard, and it is quite rare actually. Most buyers nowadays only put 5% down, if that.
From a bank’s perspective, a larger down payment indicates more financial strength, and you’ll be rewarded with a lower interest rate. A 20% down payment reduces the need to carry private mortgage insurance until a 20% equity is financed into the house.
If you could save a 20% down payment before buying ah house, that is great, otherwise, just save as much as possible. Even 10% down will get you a lower rate than no down payment at all.
Watch Your Credit Score
You do not need to have a perfect credit score to get a good mortgage; however, you do need a good credit score to get the best possible interest rate. Raising your FICO score simply consists of paying your bills on time and not carrying huge balances on your credit cards for an extended period of time.
By following this advice, you’ll qualify for the best mortgage interest rates, saving yourself thousands over the life of the loan.