One thing most borrowers want is a lower interest rate. You see crazy low rates advertised everywhere, but when you apply for a mortgage, you don’t get those rates. Why the difference?
It’s likely due to your qualifying factors. Lenders reserve the ‘best’ interest rates for ‘great’ borrowers. What makes a great borrower and how can you be one?
Check out the top four ways to increase your chances of getting a better mortgage rate today.
Improve your Credit
Lenders look at your credit score first. Consider it their first impression of your financial responsibility. If you have a poor or even fair credit score, you won’t secure the best interest rates. Pull your free credit report here and see where you should make improvements.
- Do you have late payments that must be brought current?
- Is more than 30 percent of your available credit card balances outstanding?
- Are there mistakes on your credit report?
Save for a Down Payment
Lenders also look at your own investment in the home. Are you putting money into it? The more you invest, the more you have at stake. Lenders like this because it increases your likelihood of making your mortgage payments on time.
The lower your risk of default is, the better the interest rates lenders offer. Start saving for a down payment long before your target date to buy a home to increase your chances of a large down payment.
Have Stable Employment
Today stable employment is few and far between thanks to the pandemic, but if you have a long-standing job, consider yourself lucky. Lenders like stability. If you have a predictable paycheck, there’s less of a risk of default or a forbearance request.
Ideally, lenders want a 2-year stable job history. If you changed jobs within the last 2 years, you won’t ruin your chances of a good interest rate. But, a few things can improve your chances:
- Stay within the same industry
- Have a valid reason for leaving your job (if you left voluntarily)
- Have proof of applicable training or schooling if you changed industries
Opt for a Shorter Term
Most people automatically choose the 30-year term, but what if you explored other options? The shorter the term you choose, the lower interest rates lenders offer, here’s why.
Lenders take a lower risk when you borrow money for a shorter term. They know they’ll have their money back sooner and can loan it to another borrower, making more money. When you tie up their funds for 30 years, though, they charge higher rates to keep profits high.
Today, interest rates are at an all-time low, so it’s a great time to take advantage! Let us help you determine where you can make things ‘less risky’ so you can secure the best interest rates available today. The earlier you start ‘perfecting your application,’ the better your chances of securing the best interest rates available today.
