5 Tips to Get a Lower Interest Rate
As a buyer, one of the issues you're facing now that may be keeping you from moving forward with your new home purchase is likely the higher interest rates we're seeing now compared to a year ago. Here are some tips to help you get those rates as low as possible so you may just be able to go ahead with buying your dream home now.
Work on you. The best version of you that you can present to a lender, the better interest rate you'll be offered. Get your credit score as high as you can. There are many resources available to advise you on just how to do that. Besides your credit score, you should also work on paying off your debt. The best mortgage interest rates are offered to borrowers with lower debt to income ratios (DTI).
Make a larger down payment. The best interest rates are offered for loans with 20% or more down. It makes sense. The more you are putting down, the less risky the loan is for the lender. If you don't have that much to put down, try asking a family member for a gift or check out my bonus tip below.
Buy points. A point is a discount in the interest rate, usually .25%, given in exchange for additional money up front, usually 1% of the loan amount. Buying points can be expensive, but often will pay for itself if you plan to keep the house and the loan for several years. Again, you can ask a family member for help (or check out my bonus tip), or you can ask the seller to pay for them. In our current market, many sellers are willing to negotiate special concessions like interest rate buydowns to get their homes sold quicker.
Look at new construction. Many builders are offering great incentives now to move their inventory when you use their in-house or preferred lender. Those incentives may be lower interest rates or a credit you can use to buy the rate down.
Compare lenders or use a mortgage broker to find the best deal for you and your situation. Make sure you aren't just comparing the interest rate. There's a lot more to consider like fees and lender credits. Any given lender will likely offer you a few options of rates and credits, and each lender will offer different sets of options. Make sure your lender is considering if you qualify for an FHA or VA loan where you may be able to get a better rate than a conventional loan. Those loans are not always available with condo purchases, so its's best to have an idea what you want to buy before making these comparisons.
Bonus Tip: The first 3 tips above made suggestions that will cost you money. Many first time home buyers just don't have the extra money to take advantage of these tips. Well, that's where this tip comes in. Did you know there are many, many down payment assistance programs available that can loan or grant you funds to help you with the money needed to buy a home? That frees you up to pay down debt or buy points, etc.
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