Mortgage Management: How to Find a Great Interest Rate on a Home Loan
Mortgages are big financial commitments –for most people, it is the biggest financial commitment they will ever make. They also are long-term commitments, with most buyers taking out 30-year loans. Because of the size and the length of the loans, it’s important to get the best deal possible on your mortgage. Here are some tips on how to find a great interest rate on a home loan.
Keep an Eye on Your Credit Score
One of the biggest factors in what kind of interest rate you get on your home loan is how good your credit score is. To get the lowest rate available, you need to have a high credit score, usually at least 720 or higher on the FICO scale. Being able to get the lowest rate possible will help you to save money, as even a quarter point difference in rate can mean you pay tens of thousands of dollars extra over the life of your mortgage loan. This is a lot of money so make sure to pay attention to your interest rate.
Mortgages are not all the same, and it’s important to talk to more than one lender when looking for a home loan. Different financial institutions have different underwriting standards, so you could get a slightly better rate at one bank. Using an online service or working with a mortgage broker can help you compare many different rates and find the best one.
Mortgage discount points allow you to lower your interest rate by paying an upfront fee. Generally one point equals 1 percent of your loan amount and will reduce your interest rate by a quarter of a point. This can be beneficial if you plan to be in your house awhile, because you will break even after a few years and then save money in the long run.
Take Advantage of Programs
There are many home loan programs out there that you may qualify for. Most of these are government programs that are targeted at specific groups, such as military veterans, people with low incomes or those moving into a targeted area, such as a rural town or inner-city neighborhood. If you qualify for one of these programs, you often can get a lower interest rate because of the government guarantees and subsidies involved.
It is important to get the lowest rate possible on your home loan to save money on finance charges over the life of the loan. Following these tips will help you to do that