A 30-year fixed rate mortgage is the most widely chosen home loan option because of the high financial predictability it offers.
Follow these tips if you want to obtain the very lowest rate to your maximum advantage.
Explore all your options
Make sure to do a thorough comparison shopping for interest rates before you settle for the best deal. Begin your search online by going through reliable websites that provide aggregated data of national rates and keep updating information regarding various mortgage loan offers.
You can gain a further edge in rates if you are a credit union member through your employer. The rates from credit unions are often more competitive.
Do not be dissuaded by the relatively tedious application process and stringent loan approval guidelines. You may also explore the possibility of taking membership of a local nonprofit credit union if it is open for the residents in your area.
Boost your credit score
Plan in advance when you thinking of taking out a 30-year fixed rate mortgage. Take conscious steps to improve your credit score because it will open the doors for lower mortgage rates for you.
Pay down your credit card debt, and avoid taking on any new loans before your mortgage is finalized.
Do not close your old credit cards, but do not apply for a new one either because these things could adversely impact your score.
Also, obtain your free credit report and review it closely. If you find any errors, make sure to dispute the entries with the credit reporting agency and get the corrections done.
Start saving for maximum down payment
When you are prepared to put more money down on the home, the mortgage provider might be more willing to offer you a lower interest rate. That’s because a higher down payment will improve the risk-reward equation from the lender’s point of view.
If your down payment is at least 20% you will not be required to pay private mortgage insurance (PMI). That alone could save you half a percent to 1 percent of your total loan amount every year.
Even if you cannot immediately pay 20% down, keep a goal to achieve that goal because the moment your loan value is 80% of your home you will be able to get rid of the PMI expense.
Lock in your interest rate
Rate fluctuations can be significant. Therefore, it makes sense to lock in your rate the moment your loan is secure and you have signed the home buyer’s agreement.
Your lender might charge you a small fee for this service, but if the closing process takes weeks and the interest rates rise in the intervening time, your gain could far outweigh a lock-in fee.
Pay your loan off faster
Although your 30-year mortgage interest rate is fixed and will not change, if you choose to pay more on the principal loan balance that will reduce your absolute interest costs over the life of your loan.
If you do pay principal, your effective mortgage interest rate will come down as you pay your loan off faster.