Getting the lowest mortgage rate is extremely important for homebuyers. Low mortgage rates save homebuyers and homeowners money on their monthly mortgage payment and help them afford the home that best suits their needs without breaking the bank.
So, here are six things homebuyers and homeowners alike can do to get the lowest mortgage rate.
#1 Monitor and Clean-Up Your Credit Report
Cleaning up your credit report is critical when you are buying a home. The first thing to do is review your credit report and make sure it is accurate. If there are mistakes, work to correct them as quickly as possible, so your credit score is as high as possible.
Though it’s a good idea to always monitor your credit report, it’s especially important the months prior to purchasing a home or refinancing. Immediately address situations that include your credit report being pulled without your consent, your identity is stolen, or any mistakes on your report.
Related: Credit Report Mistakes
#2 Raise Your Credit Score
Besides monitoring and cleaning up your credit report, there are several things borrowers can do to raise their credit score, which helps them qualify for a mortgage with a lower interest rate.
Here is a list of the common ways most borrowers can raise their credit score:
- Use credit, and use different types of credit.
- Judiciously apply for new credit.
- Keep balances low relative to credit limits.
- Don’t close old, unused credit accounts.
- Make sure bills are paid on time.
For specifics on each of these methods of raising your credit score, see, 6 Simple Ways To Raise Your FICO Credit Score.
#3 Do Not Finance Closing Costs
As a general rule, you will qualify for a lower mortgage rate if you pay the closing costs rather than finance them.
With that said, many people either do not have the cash or do not want to spend their cash, to pay closing costs. They would rather buy a home wherein the seller pays all, or part, of the closing costs, or they would rather finance the closing costs.
Just remember, that if you opt to finance closing costs, your mortgage interest rate will probably be a little higher.
#4 Lower Your Debt-To-Income Ratio (DTI)
Borrowers with a lower debt-to-income ratio (DTI) will almost always qualify for a lower interest rate on their mortgage. Paying down debt in advance of applying for a mortgage, therefore, can help you get a lower interest rate.
Lenders use the debt-to-income ratio to determine the type of mortgage for which a borrower qualifies, as well as the interest rate. Therefore, it’s beneficial for homebuyers, and homeowners refinancing a home, to understand how the debt-to-income ratio works – both the front-end ratio and back-end ratio.
To learn the specifics, see: What is your debt-to-income ratio, and why is it important in qualifying for a mortgage?
#5 Make a Large Down Payment
Making a large down payment is one of the best ways to get a lower interest rate on a mortgage.
Lenders take into account that a home loan with a larger down payment is less risky than a loan with a low down payment.
To get the lowest interest rate, borrowers typically need to get a conventional mortgage with a 20% down payment. This mortgage not only comes with a lower interest rate, it also does not have the funding fees and insurance payments associated with low down payment mortgages.
#6 Increase Your Cash Reserves
When applying for a mortgage, your cash reserves are measured as the number of monthly house payments you have in savings.
Money that counts toward your cash reserves includes money in various savings accounts, such as money market accounts and CDs. In general, money in retirement accounts, or in an account from which you can’t withdraw without paying taxes or penalties, is not counted toward cash reserves.
Typically, lenders required borrowers to have two months of cash reserves, meaning they could pay the mortgage for 60 days without additional income. However, borrowers with a higher-risk loan, such as a jumbo loan, may be required to have more than two months of cash reserves.
Marimark Mortgage
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.

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