How to Get a Good Mortgage Rate

The world of mortgages can be confusing as there are so many products available. When looking for the best rate possible, consider following these easy-to-use steps to help you get a good rate on your mortgage.

Difficulty:

Easy

Instructions

Things You'll Need

• Knowledge of your personal financial situation (assets, liabilities)
• Knowledge of your credit score

1. Be familiar with your entire personal financial situation. You should know the following information prior to speaking with a mortgage lender to help you get the best mortgage rate: how much you can afford to spend each month on your housing payment; funds you have available for a down payment and closing costs; and your credit score.

2. Interview mortgage lenders and present your financial situation. Once lenders are familiar with your qualifications, they can help direct you toward different products with different rates.

3. When reviewing available mortgage products, be aware that the lowest rate isn't always the best deal for your personal situation. Be sure to ask your lender for the "total cost" of each loan product over the life of the loan. It can be surprising to see even some low-rate loans can cost your ten of thousands of dollars more over the life of your loan.

4. After examining the total cost of a loan, ask your lender for the total closing costs on each loan. Closing costs are the fees required by a lender to perform the legal process of transferring property ownership to you, the buyer. If a lender says there are "no closing costs," beware. If you do not pay them up front, they are rolled into the costs of the loan and will cost you more in the long run.

5. If the lender tells you that your credit score is preventing you from receiving a better interest rate on your mortgage, ask how you can improve your score. If you have some flexibility with your purchase time frame, just a few months of paying down debt can make a positive impact on your score.

6. Once you've reviewed the total cost for each loan product, the closing costs and how your credit score is impacting your rates, you can complete the process of choosing the right mortgage by reviewing each of the options presented to you. Based on the information you have gathered, you'll be able to get the best loan available to you.

Tips & Warnings

• A good rate for you might not be the same as a good rate for another borrower. Credit scores have a significant impact on your ability to receive the lowest interest rate. Scores above 680 will generally be offered lower rates. If you encounter errors on your credit report, you can make efforts to fix them.

• Remember that the lowest rate isn't always the lowest cost mortgage.

References

• Bankrate.com: 5 Ways to Get the Best Mortgage Deal