First-time borrowers might not fully understand how they can get a lower interest rate on their home loans; experienced house hunters who have been through the home buying process before aren’t necessarily at an advantage in this area.
No matter whether you have owned a home before or not, it’s smart to focus on what can be done to earn a competitive interest rate on a home loan, home loan refinance, etc.
Want A Lower Interest Rate On Your FHA Mortgage? Check Your Credit Scores
It’s possible to apply for a home loan without ever looking at your credit report. It’s also a very bad idea to do so.
Why? Borrowers who are unaware of the information in their credit reports are not ready to apply for a home loan. Don’t miss out on a more affordable loan and better interest rates by finding out what needs to be done for you to work on your credit scores.
Best advice? Begin fixing your credit immediately by paying on time every time for at least 12 months.
You will need to avoid applying for new credit, but doing these steps puts you on the road toward raising your credit scores which in turn helps you to get offered lower interest rates from your participating FHA lender.
Do You Want A Lower Interest Rate On Your FHA Loan? Improve Your Debt-To-Income Ratio
If you apply for a big line of credit like a home loan while carrying too much debt (compared to your current income every month), your lender may charge you a higher interest rate.
Fix this by lowering your current monthly debt as much as you can before applying for a home loan.
Get A Lower Mortgage Rate By Applying For A Shorter Loan Term
Not everyone can afford to apply for a 15-year mortgage instead of a 30-year loan but those who can should seriously consider applying for a shorter loan term. Interest rates on 15-year fixed-rate home loans are lower than for 30-year fixed-rate mortgages.
Purchasing Discount Points Lowers Your Interest Rate
Ask your lender how buying down your interest rate can affect the up-front cost of the mortgage. Compare that to the amount of savings you’ll get over time if you purchase the discount points.
Your lender may offer (depending on the transaction) to include a certain amount of discount points into the loan amount–be sure to ask how this will change how much you have to pay every month on your mortgage.