How Do I Get The Best Mortgage Rates?

Mortgage rates
Shopping around for mortgage rates can lead to significant savings!

House hunting to find your dream home is exciting. Once you are able to identify a property, the next step for most buyers is to shop around for mortgage rates. Of course, it is safe to say that this is not the most exciting part of the home buying process. A good mortgage rate can make a huge difference in your monthly payment and the overall cost of your home. Below, we discuss how to position yourself to find the best possible mortgage rates.

Steps to obtaining mortgage rates

Step 1: Be the Model Borrower

Lenders love low-risk borrowers. This means sprucing up your credit score. Aim for at least a 680, but the higher the better. You can improve your score by paying bills on time, keeping credit card balances low, and disputing any errors on your credit report.

Step 2: Down Payment Discipline

The more money you put down upfront, the lower the interest rate you’ll typically qualify for. This is because you’re borrowing less and the lender has less risk. While a 20% down payment is ideal, there are programs available with lower down payments.

Step 3: Debt Diet

Lenders look at your debt-to-income ratio (DTI). This is the total amount you owe each month divided by your gross monthly income. Bringing down your DTI by paying off debt (especially high-interest credit card debt) can significantly improve your chances of getting a good rate.

Step 4: Shop Around Like a Savvy Consumer

Don’t settle for the first rate you’re offered. Get quotes from at least three lenders, including banks, credit unions, and online lenders. Compare interest rates, but also factor in fees. The Annual Percentage Rate (APR) considers both the interest rate and fees, giving you a truer picture of the loan’s cost.

Step 5: Consider Different Loan Options

Not all mortgages are created equal. Explore your options – fixed-rate vs. adjustable-rate mortgages (ARMs) – to find the one that best suits your financial goals and risk tolerance.

Bonus tips for mortgage rates

  • Get Pre-Approved: A pre-approval from a lender strengthens your offer when bidding on a house. It shows sellers you’re a serious buyer with a clear picture of your borrowing power.
  • Don’t Forget Closing Costs: While the focus is on interest rates, don’t neglect closing costs, which can add a hefty sum to your home buying expenses. Understanding these fees – origination fees, appraisal costs, title insurance – allows you to factor them into your budget and potentially negotiate them with lenders.

Summary

By following these steps, you’ll be well on your way to securing the best possible mortgage rate and saving a significant amount of money over the life of your loan. Remember, a little preparation can go a long way towards making your homeownership dream a reality, and at a price you can afford.

Are you thinking about buying or selling a property in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, don’t forget to download the free Florida Home Search app for your smartphone or tablet!

By natasha moore

REALTOR® with Live South Florida Realty, Inc.