Owning a home is one of the most prestigious things that can happen in your life. Imagine walking into your own garden or a newly decorated patio. Imagine living in a house with your sense of style all over it!
The only thing that could be standing between you and your newly acquired home is a hefty mortgage rate. Buying a home is an expensive venture. This is why a majority of homebuyers opt for a mortgage.
Well, some may argue and say that finding the right property is the hardest part of the equation. However, this is only half the battle.
The other half is choosing a mortgage rate that will serve you for as long as you are supposed to pay it. So how do you choose the best mortgage rates? Let’s count the ways:
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Get a fixed-rate or adjustable mortgage, depending on which one works for you
Mortgages come with two rates; fixed or adjustable. With a fixed-rate mortgage, you’ll be locked into a consistent interest rate that you will have to settle over the lifespan of the loan.
The good thing about this is that you’re aware of what you’re expected to pay, and for however long you’ll be paying, before collecting the mortgage.
A fixed-rate mortgage works where part of the payment that goes toward the principal amount of the loan remains constant while other factors like property tax and insurance may fluctuate throughout the loan term.
On the other hand, a mortgage with an adjustable-rate changes from time to time. It usually begins with an introductory period where the interest rate will hold steadily for a certain amount of time and then change periodically.
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Keep an eye on your discount points
Did you know that one discount point is 1% of your loan amount, which will eventually reduce by 0.25%? For instance, if you take a loan at a 3.5% interest, you might be able to pay a $1,000 fee to reduce the rate to 2.25%.
When you cash in your discount points, you’ll spend thousands of dollars upfront to save on a few dollars monthly. This strategy works best for long-term mortgages in comparison to mortgage loans that can be paid in a shorter time period.
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Understand the closing costs
This is the fee that your lender will charge. It’s about 3% of the purchase of your home and should be paid when you close on your purchase.
The fee comprises of the lender’s underwriting, processing charges, and title insurance amongst other fees. This fee doesn’t affect the mortgage rate, not unless it’s paid using discount points.
Ideally, you’re looking for lower closing costs as this is indicative of a favorable mortgage rate. If you’re not sure where to look, a Loan Estimate Form will offer a variety of lender options and their estimated closing costs.
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Consider first-time home buyer programs
Before you settle on a specific mortgage rate, you should find out if there are any programs that will make your homebuying a less costly experience. Different states offer help to first-time as well as repeat buyers.
This could be in form of tax breaks, favorable interest rates, down payment assistance, and much more. A little research will also go a long way when it comes to these special programs.
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Compare, compare, compare!
You can’t rely on information from a single lender. The more you compare, the more likely, you’ll find a rate that suits you. To do this., apply for a mortgage with different lenders as they will each come back with their best rates, making it easy for you to choose.
This in itself could take a lot of time and dedication, therefore, you should start your research when you have sufficient time. Also, don’t forget your Loan Estimate Form as it will help you compare different mortgage offers.
Summary
Depending on the market or national rates, mortgage rates may fluctuate from time to time. This is why it’s best to have a good understanding of the lending process so you’ll be on your way to borrower success.
The first step to this? Improve your credit score and lenders will approach you with a lower interest rate. With a low credit score, you’ll be inviting a higher rate. By following all of the aforementioned rules, you’ll enjoy a great mortgage rate on your mortgage.
Interesting Related Article: “How to Choose the Right Mortgage”