How to Get a Good Interest Rate on a Mortgage

Buying a home is without a doubt a big financial commitment. Trying to find the right mortgage (along with how to get the best mortgage rate) can be a very confusing process, more so for first-time homebuyers. Fact is, comparison-shopping is the key to getting the best deal available.

There are several factors that can affect your mortgage rate. These can include the mortgage type, your credit score, and your down payment. If you are using a real estate agent, most likely you will be directed to a handful of preferred lenders, whether or not the rates are competitive.

Consider how long you will be in your house

If you don’t have plans to live in your new house for more than a few years, adjustable-rate mortgages might make a little more sense. Adjustable-rate mortgages (ARMs) generally have a low initial interest rate that will increase after a specified period. Many homeowners are able to take advantage of those low rates by selling their homes before the rates increase.

If ARMs present too much of a risk to you, then take a serious look at short-term fixed-rate mortgages. Your monthly payments will be a little bigger, but you will get a much lower interest rate, you will pay much less over the life of the loan, and build your equity a lot faster

The days when banks fell over themselves to give you a mortgage are long-gone. These days, borrowers can increase their chances of taking advantage of today’s current crop of home loans by giving themselves a mortgage makeover.

With so many lenders tightening their criteria because of regulatory changes, demanding bigger deposits and hand-picking the best borrowers, potential homebuyers now need to put in some extra work.

Make yourself attractive

There are a few simple things that you can do to make yourself a more attractive proposition to lenders.

Be sure that you are on the electoral roll and everything is in proper order when it comes to your address. Lenders always check your name against your address, so make sure everything matches up perfectly.

Be sure to check your credit file with the major credit agencies to make sure everything there is in order. Always challenge anything that is not correct.

It’s a good idea to get a credit card, spend some money and then pay it back. Lenders really like people who have a history of borrowing money and then paying it back on time. It may not always be within your control, but it’s recommended that if you’re trying to get a mortgage to buy a house, don’t switch rental properties or jobs.

In these uncertain times, lenders very much like stability. This means the same job for the last six months or a year, living in the same home for six months and a steady income that can be proved by your bank statements.

Beef up your down payment

Saving up for a 20% down payment can be tough, but this is one of the most impactful ways to get the lowest mortgage rate and save money down the road. Plus, if you put down enough, you won’t have to worry about paying mortgage insurance.