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Home / Blog / Mortgage Rates / Tips to Get the Best Interest Rate on Your Mortgage

Tips to Get the Best Interest Rate on Your Mortgage

January 7, 2022 By Admin

Tips Best Mortgage Interest RatesWhen buying or refinancing a home, every homeowner desires to have the lowest monthly mortgage payment and to save money where possible.

It is crucial to get the best interest rate for your mortgage to have the lowest possible monthly payment. So, here are some tips for getting the best interest rate on your mortgage.

Related: 6 Tips To Get The Lowest Mortgage Rate

Fixed-Rate Versus Adjustable-Rate Mortgages

You can get a low introductory interest rate with an adjustable-rate mortgage (ARM), but the introductory rate (teaser rate) is temporary. After the introductory period, the interest rate fluctuates according to the mortgage terms.

The mortgage’s interest rate and monthly payment can vary substantially, so be sure you can afford an ARM in an environment where interest rates rise quickly.

Fixed-rate mortgages do not change and provide a level of security regarding the monthly payment. However, they are likely to have a higher interest rate at the beginning of the loan than an ARM, but they could have a lower interest rate during the loan term if rates rise.

Most homeowners find that a fixed-rate mortgage is a better and safer option.

Related: Mortgage Teaser Rates

Buy Points for a Lower Interest Rate

Some mortgage lenders allow borrowers to buy points to lower their interest rate, called “buying down a mortgage” or a “buydown mortgage.”

To buy down a mortgage rate, borrowers pay an additional charge in the form of points (also known as “discount points”) in exchange for a lower interest rate on their mortgage. For example, the lender may offer a 0.25% interest rate reduction on the first point you buy depending on the transaction. (A point is 1% of the home’s purchase price.)

To determine whether buying points are beneficial, borrowers should calculate the savings from buying down the mortgage interest rate based on how long they anticipate living in the home.

Related: Should You Buy Points to Lower Your Mortgage Interest Rate?

Special Home Loan Programs

Suppose you are considering buying a home or refinancing an existing mortgage. In that case, it may be possible that you qualify for any of the home loan programs provided by the government or a lender.

Government-backed home loan programs include:

  • VA home loans are available to qualifying veterans and their spouse. The loan program includes zero down payment options.
  • FHA home loans are available to U.S. residents and feature a low as 3.5% down payment. It can also be easier to qualify for an FHA loan than a conventional loan if you have a lower credit score.
  • USDA home loans feature a zero-down payment option and are available to homebuyers in specified rural areas. See the USDA eligibility map to determine which areas are available for a USDA loan.
  • First-time homebuyer programs are available. For information on homeownership and home buying assistance programs in your state, see the HUD Website / Local Information.

Occasionally, lenders offer home loan programs that can help with the down payment or be structured to help with closing costs.

Larger Down Payment

Making a larger down payment is one of the best ways to get a lower interest rate on a mortgage. By making a larger down payment, you are sharing more of the mortgage risk; therefore, the lender can lower the interest rate.

A down payment that is large enough to eliminate mortgage protection insurance will also reduce your monthly payment and possibly give you the option to pay more principal each month and grow your equity more quickly.

Higher Credit Score

As a general rule, a higher credit score results in a lower interest rate because borrowers with a higher credit score are less of a risk for the lender since they are statistically in a better position to repay the loan.

Then, working to raise your credit score is working to get a lower interest rate and a lower monthly payment on your mortgage.

Oftentimes, small changes in how you use credit can significantly increase your credit score.

  • Check your credit report and correct mistakes.
  • 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.

Related: 6 Simple Ways To Raise Your FICO Credit Score

Do Not Finance Closing Costs

In general, paying the closing costs rather than financing them can lower interest rates. However, many borrowers opt to finance the closing costs. No matter how you choose to pay closing costs, know that financing closing costs will probably result in a slightly higher interest rate.

Shop Interest Rates and Fees

It is crucial to work with a mortgage broker who shops numerous lending sources to find the best home loan for you. Lenders have different interest rates and fees, so it helps to shop around for the best deal.

Video Transcript: Why did my neighbor get a better mortgage rate?

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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We especially focus on ways to save money on your current and future mortgages. And, we continually share the information we share with our clients, because we believe informed consumers are the best consumers.

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Filed Under: Mortgage Rates

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

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