There is probably a better mortgage rate for you
You just don’t have it found it still. Here are five proven strategies to lower the mortgage interest rates that the lenders offer you or when you refinance buy a house.
Confirm your new plan (June 14, 2021)
1. Increase your FICO by one point
Mortgage prices for most products are set in stages. For example, there is a rate for applicants with FICO scores between 620 and 639, a better rate for those in the 639 to 660 range, and so on.
Depending on your current score, Add between one and 19 points can put you in a better group that deserves a better interest rate.
Fannie Mae offers a handy chart called the Loan Level Pricing Adjustment Matrix, or LLPA. It shows that having a low credit score can reduce the burden on your mortgage.
Moving up a tier saves borrowers around 0.5 percent on loan fees in many cases. That’s enough to cut your mortgage rate by about 0.125 percent.
Going up two notches (20 to 39 points on your FICO) should decrease your rate by about 0.25 percent.
2. Get at least 4 mortgage rate quotes
Several studies of mortgage buyers have found that many borrowers leave a lot of money on the table when applying for a home loan.
For example researchers from Stanford University discovered that comparing four mortgage offers instead of just one or two saved an average of $ 2,664 on a $ 200,000 mortgage. That’s over one percent of the loan amount – enough to buy yourself a 0.25 percent lower mortgage rate.
3. Complete your loan quickly
Your mortgage rate is affected by your lock-up period. For example, the following are points you would pay according to a lender’s actual interest rate at the time of this writing. Lower tariffs are available for shorter blocking times.
If you complete your loan in 15 days instead of 60 days, you can cut your interest rate by about 0.125 percent.
That could save you $ 20 on a $ 350,000 loan per month.
How do you get a shorter embargo period? By having all the information and documentation your lender will need upfront. The less back and forth between you, your loan officer, and your insurer, the more faster your mortgage can close. And the faster it closes, the shorter the lock.
Confirm your new plan (June 14, 2021)
4. Choose the right product
You can lower your interest rate by shortening the term of your loan. Data from the National Association of Brokers (NAR) point out that most people don’t need a 30 year fixed rate home loan because they won’t keep their property that long.
The NAR says: “As a rule, the older the home seller, the longer the time they live in their house – this is one factor in the fact that fewer sellers had to stop selling their home. Generation Y typically owned their home for five years, while Older Boomers and the Quiet Generation owned their homes for 13 years before they were sold. “
If you are a younger buyer, why pay about a percent higher interest rate to pay off a loan that you no longer need after five years?
There is a better product for you. It’s called a hybrid ARM. This loan combines the characteristics of a variable rate mortgage with those of a fixed rate home loan.
You can choose an interest rate and term that suit your future plans. The start rate can be set to three, five, seven or ten years.
Below is a national lender’s interest sheet as of today showing the difference in interest rates between 3/1, 5/1, 7/1, and 10/1 ARMs.
- 3/1 ARM (fixed for three years): 2.875% *
- 5/1 ARM (fixed for five years): 3.125%
- 7/1 ARM (fixed for seven years): 3.375%
- 10/1 ARM (fixed for ten years): 3.75%
The 30-year fixed-rate loan from the same bank is now 4.25 percent. Switching to any of the products listed above could lower your interest rate by 0.50 to 1.375%. With a $ 200,000 mortgage, the difference between the 3/1 and 30 year mortgage payments is $ 154.09 – a savings of over $ 5,400 in three years.
Buy your rate down – or better yet, let the seller do it
One surefire way to get a lower interest rate is by paying rebate points. “Discount points” are optional fees that borrowers can pay if they want a lower interest rate and payment. Pay discount points only makes sense if you intend to keep your property for some time.
They can also make sense if you can get your seller to cover them when negotiating your home purchase. Taking $ 5,000 off the home price can’t do much, all that using $ 5,000 for a lower price could do more to make your home more affordable.
Here is a chart that shows the typical interest rates at the time of this writing and what you get if you prepay more:
The longer you plan to keep your home and loan, the more sensible it is to cut mortgage rates in the first place. If you only plan to keep your property for a few years or you don’t know what your plans are, you are probably better off with a lower cost of ownership loan.
What are the current mortgage rates?
Current mortgage rates today depend on your creditworthiness. The number of mortgage offers you receive also matters. The program you choose and the amount you pay for your funding will also determine your interest rate. Talk to an experienced loan officer about your needs and priorities and choose the loan with the best terms and lowest cost for your situation.
Confirm your new plan (June 14, 2021)
* Prices are shown for comparison purposes only and may not be available at the moment.
