CBGE

About the financial crisis & how we cope with it

Buying a house: how to get the best mortgage rate

When people buy a house they put a lot of thought and effort into making sure that they get the best price on the house. Oddly the same people put almost no effort into making sure that they get the best mortgage rate. This is a mistake getting the best mortgage rate is fairly easy and it will save you a lot of money.

The most important thing that you have to have in order to get the best mortgage rate is good credit. This goes without saying of course since your mortgage rate is how lenders determine how likely you are to pay back the money that you have borrowed. If your credit is less than perfect you will likely still be able to qualify for a mortgage but it will cost you more. Before you apply for a mortgage make sure that your credit is as good as you can get it. There are things that you can do to improve your credit very quickly, make sure that you look into them.

The next thing that affects your mortgage rate is the amount of debt that you have relative to the amount that you earn. That means that even if you have good credit you may still not get the best possible mortgage mortgage rate. If you have too much debt the lender will worry that you may not be able to pay all of it back so they will charge a higher interest rate. If you want to get the best mortgage rate you should try to pay off as much debt as you can before you apply.

The last big factor that lenders look at when they are determining your mortgage rate is the size of your down payment. If you are a first time home buyer you can get a mortgage with as little as five percent down, but this will come with a higher interest rate. In order to get the best rate you will need to put down twenty percent. This is because it means there will be enough equity in the house that if the bank has to foreclose they will be able to sell it for enough to recoup the money that you borrowed.

One last thing that you have to do in order to get the best possible mortgage rate is to shop around. Different lenders have different criteria for giving out mortgages so you are going to want to shop around to find the one that offers you the best rate. This is fairly easy to do these days with online quotes available from virtually every lender. Remember that even a small difference in interest rate can add up to thousands of dollars over the length of the mortgage so it is well worth it to shop around to make sure that you are getting the best rate.