For most Americans, buying a home is the biggest investment they will make in their lifetime. It can also be the scariest unless you do your homework. Getting a mortgage loan with low interest rate can make a difference in whether you can afford a nice home and it is easier to achieve than you think. Here are things you must do to receive a home mortgage with low interest rates.
Know your credit picture before you begin. Get to know what banks and other lending institutions will see when they look at your credit history. Go to Annual Credit Report and check your credit report with all three reporting agencies; Equifax, TransUnion and Experian for free. Verify that everything in your credit report with all credit reporting agencies is accurate. Correct any inaccuracies with the reporting agencies. See Resources below for additional information.
Reduce the number of open lines of credit. Most lenders consider it a negative if you have too many lines of credit open. If you have car payments, store cards, gas cards and other major credit cards, consider paying off some of the credit cards and closing the accounts before embarking on your mortgage loan hunt. This will improve your credit picture and help lower your mortgage loan rate.
Use online mortgage calculators to know home much house you can afford. When you know how much house you can afford based on your income and credit history, you feel confident talking to loan officials. Some websites offer free interest calculators. See Resources below for additional information.
Use the services of mortgage loan aggregators to check rates offered by several companies together instead of individually. This allows you to compare them using the same factors. Loan aggregators like Eloan and Lending Tree offer quotes from different companies. Check rates offered by your local banks or credit unions. Sometimes you can find bargains this way. See Resources below for additional information.
Increase the amount of down payment you are offering. If you can afford it, offer a down payment of 20 percent or more. This alone will drop your interest rate a few percentage points.
Consider Adjustable Mortgage Rate (ARM) instead of fixed rate mortgage loans. Most ARMs start with low interest rates before resetting to higher rates a few years later. This allows you to obtain low interest rates at the beginning. Get a co-signer with better credit history than you do. This can be your spouse or other family members.
Get a shorter loan term. 15-year mortgage loans carry interest rates typically a few percentage points lower than 30-year fixed loans. This also allows you to pay the loan off sooner.