Loanbox Mortgage

How To Get The Best Mortgage Rate

For many Americans, buying a home will likely be the biggest single purchase they will make. The average home value in the US is about $231,000, but most people do not have that kind of amount lying around. This is why a mortgage has become an essential part of the homebuying process.


The terms of one’s mortgage will greatly affect how much one will spend. Lowering one’s mortgage rate by only a few points will save the borrower thousands throughout the loan duration. Doing some due diligence in looking for the best rates plus making sure that one has good credit scores and debt-to-income ratio will help the borrower get better rates.


To find the best rates, keep in mind the following:


Improve One’s FICO Score

A credit score is an important factor in determining risk. It will make a big difference in what rate the borrower will get. The higher the score the better rate one can receive.


Improving one’s credit score will need some discipline and careful financial management. This entails paying bills on time and clearing credit card balances, or at least keeping them below 20% of one’s credit limit. It is also a good idea to check this score regularly for errors.


Show Proof Of A Stable Income

Lenders prefer borrowers who can prove that they have a consistent source of income. One can prove this by showing pay stubs and W-2s for the last two years. A new job will not necessarily make the application difficult. As long as the job pays a salary large enough to support the borrower’s mortgage payment, it will suffice to most lenders.


Prepare A Down Payment

Paying a higher down payment can help lower the mortgage rate. For lenders, a larger down payment shows that they easily get their money back if the borrower defaults. Reducing the lender’s risk can potentially reduce one’s interest charges. Lenders will also accept lower down payments, but anything less than 20% will require private mortgage insurance, which must be paid monthly.


Shop Around

Do some research by talking with different lenders. Shop around and compare the different loan estimates. According to a Freddie Mac report, an average borrower could save $1,500 by simply getting one extra rate quote. They could save $3,000 or more, with five quotes. But the same report also said that borrowers skip this part, so do not make this mistake.


Lock In The Lowest Rate

After signing the home purchase agreement and securing the loan, it is a good idea to lock in the rate one is comfortable with. For a fee, lenders can guarantee the interest rate of a loan for a period of time. This period typically extends from the approval through to closing.


The benefits of a rate lock-in often outweigh the risks as mortgage rates fluctuate like stock market prices. It is a good idea to lock down the best rate one can find as soon as possible.


Make The Best Decision

Looking for the best mortgage rates? Call (949) 284-2700 to receive expert advice from a Loanbox Mortgage consultant or visit Loanbox Mortgage for a free quote.

A Canadian native, Noelle attended Ryerson Polytechnic Institute in Toronto where she obtained a Bachelor of Technology in Architectural Science. In 1990 she moved to Southern California and got her start in the mortgage industry. In 1994 she obtained her Mortgage Broker License and has since managed mortgage and private lending companies.
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