A number of factors go into your mortgage interest rate.
One of them is you.Interest rates can greatly impact your
monthly mortgage payment and the amount of home you
can afford. The lower your rate, the lower your payment.
While a lot of external factors dictate mortgage interest
rates, it’s helpful to know that there are a few things you
can control.
Keep a healthy credit score
Although a lower credit score may qualify you for a
mortgage, the higher your score, the better your interest
rate and loan options will be. A score in the 700s is ideal.
Pay more per month for a shorter term
In general, shorter-term loans such as 15- and 20-year
mortgages have lower interest rates than standard 30-
year loans. The shorter term means your monthly
mortgage payment will be higher, but you will pay less in
interest over the term of the mortgage.
Go Conventional
There are many different loan options available to
homebuyers. Mortgage interest rates can vary by
program, so it’s important to compare options with your
lender. Some loan programs offer incentives like deferred
down payments and lower minimum credit scores to help
buyers step into homeownership.
Put your max money down
While a 20% down payment is not required to buy a
home, typically, the more you put down on a home, the
lower your mortgage interest rate will be.
Get the point
You can purchase discount points to bring down your
interest rate. If you pay this up-front, you will receive a
lower rate and pay less over time. If you have a motivated
seller, you may even negotiate with your seller to pay the
points.
Lastly, pay attention to the interest rate type. An
adjustable rate loan may start off with an introductory low
rate and then adjust to the current interest rate at the
time. Depending on the market, this may be risky. Fixed
rates are generally higher at the start, but at least are
predictable. After a certain period of time, you can choose
to refinance into a better rate when the market improves.