5 Keys To Scoring Low-Rate Mortgage Loans

Obtaining low mortgage loans rates can mean the difference between a manageable payment and not, but having a low rate can also increase your purchasing power and allow you to get a bigger or better house. The higher the rate, the higher the payment, and the higher your rate, the more you end up paying for the house over the life of the loan.

You can improve your chances of obtaining a low rate mortgage with these five tips:

  1. Pay down debt. Your debt to income ratio tells the bank how much free income you have. While it is used mainly to determine your purchase power, having your debt paid down also helps improve your credit score, which can help you get a better rate.
  2. Clean up your credit. Order a copy of your credit report and review it carefully. If there are old, charged off debts that you can clear up by paying off or if there are errors on the report that you can correct, taking care of those small issues can save you plenty on your mortgage rate.
  3. Make a larger down payment. Lenders want to know you are serious about making your payments, so the more you invest up front, the better risk you become. Increasing your down payment by even as little as $500 can make a difference.
  4. Buy points. You can pay a fee when you obtain your mortgage to reduce your interest rate. To determine whether or not buying points is worth the cost, you need to know how long you plan to own the property. The longer you plan to own it, the more likely you are to benefit from buying points.
  5. Choose a 15-year mortgage. While not as common as 30-year mortgages, 15-year mortgages are not only paid off in half the time but offer considerably lower interest rates, saving you money in two ways.