How to Qualify for a Low Interest Mortgage

If you are in the market for a house, a low interest mortgage is most likely on your priority list. Paying interest is something that no one looks forward to as a homeowner. The interest on the mortgage that you select will amount to a significant amount of money over 30 years. Therefore, it is in your best interest to get the interest rate as low as possible. It will save you money in the long-term and it will lower your monthly payment significantly. Here are some things that you may need to do in order to qualify for a low interest mortgage. 

Fix Your Credit

One of the most important factors in determining the interest rate that you are offered is your credit file. If you have a high credit score, you will most likely qualify for the best interest rates in the industry. If your score is lower than it should be, you will be charged more for interest or you will not qualify for a loan at all. This means that it should be a major priority for you to get your credit file in the best shape that you can. 

Fixing your credit is not something that you can do overnight. There is no magic button that will allow you to fix your credit. Therefore, if your score is low, it may take a while to raise it back up. This might take you months or years to fix. You will have to be patient and know that you will be making a big difference on the mortgage that you can qualify for as a result.

Get a Cosigner

Something else that may help you secure a low interest rate is to get a cosigner on the loan. This step may be difficult as you will have to convince someone to go out on a limb for you financially. When you get a cosigner, the lender will look at both credit files. They will want to see at least one of you have a good credit score. They will also consider both incomes for the loan. This can be a good strategy if you have a family member or loved one that trusts you enough to sign the loan for you. However, if you default on the loan, they will be responsible for the money. 

Buy Points

Another way to get a lower interest rate on your mortgage is to buy points. When you buy points on a mortgage, you are essentially buying down the interest rate. The bank wants to get their money one way or another. This means that they will try and get the money upfront in the form of points instead of over the life of the loan in interest.

One point is equal to 1% of the mortgage balance. So if you borrow $200,000 for a mortgage, each point will be $2000. The more money you put up in the form of points, the cheaper your interest rate will be on your mortgage.