If you’re buying a house, you likely want the best mortgage rate. That makes perfect sense! Finding the lowest mortgage interest rates can mean saving a lot of money over the loan’s term.
Knowing how to find the best rates can change your financial outlook. Even small differences in rates can significantly increase the cost of your mortgage. Using these tips, you can land the most competitive mortgage interest rates and keep more money in your pocket throughout your loan period.
Here are some straightforward strategies to get the best mortgage rate for your newly purchased home.
Check Your Credit Score:
Your credit score holds significant weight when it comes to mortgage rates. Lenders use this score to figure out how trustworthy you are with credit and the likelihood of repaying the loan. If your credit score is high, you’re likely to get access to lower interest rates, which means saving cash throughout your mortgage.
Checking your credit score before applying for a mortgage is a good idea. Striving for a credit score of 680 or more is wise; it qualifies you for more favourable rates. You can pull a free credit report annually from Equifax or TransUnion.
And if your score isn’t as high as you want, there’s no need to worry. You can improve it before applying for that mortgage by paying off debts and consistently paying your bills on time.
Improve Your Credit Score
Consider a few steps to improve your credit score before seeking a mortgage. Ensure you pay your bills on time each month without missing any. How much you spend dramatically influences your credit score. This includes credit cards, loans, utilities, and phone bills.
Secondly, it’s important to maintain low credit card balances relative to your limits. Carrying a high balance can hurt your credit score, so work towards paying those down. Lastly, try not to open new credit lines too often. Each time you apply for new credit, like a credit card, your score might dip slightly for a short period.
Use a Mortgage Agent
A mortgage agent makes it easier to get your head around the mortgage marketplace. They also help you snag the best rates and terms that suit your needs. They partner with various lenders, from banks and credit unions to private funding sources. By doing so, they open up a wider selection of mortgage options and interest rates than you’d likely find on your own.
These agents are whizzes at the ins and outs of the mortgage world. They’re ready to offer helpful advice when buying a home. They’ll guide you through your choices, help you cut through mortgage agreements, and land a loan with favourable interest rates.
Maintain Stable Employment
When you apply for a mortgage, lenders will consider your job history and earnings stability. A regular job with a steady paycheck gives them confidence that you’ll make your mortgage payments on time.
They might ask for recent payslips or tax documents to check your income. A solid record of ongoing employment also helps build a positive credit history. It shows that you’re financially responsible and trustworthy to those lending you money.
Save for a Down Payment
You won’t have to borrow as much if you put down more money upfront when buying a house. Your down payment influences how your home loan compares to its appraised value. With a bigger down payment, this ratio goes down, which banks like because it’s less of a gamble for them.
However, if your down payment is under 20% of the house price, you might have to get private mortgage insurance (PMI). This insurance covers the bank if you can’t pay back your loan. However, you’ll have a higher monthly mortgage bill and pay more in the long run.
You can get a better interest rate by saving up for a substantial down payment and sidestepping PMI. This will keep more money in your pocket.
Get Pre-Approved
Getting pre-approved for a mortgage clarifies how much money you can spend on a house. During the pre-approval process, your lender will review your finances, including your earnings, possessions, debts, and credit score.
After assessing these details, they will issue you a letter confirming your pre-approval. When you secure a mortgage pre-approval, you may have the option to fix your interest rate for a set time frame, typically between 30 and 60 days. This could work to your advantage if interest rates go up.