Getting a mortgage is a part of life but that doesn’t mean you have to pay an exorbitant rate. Instead, you can take the time to learn some of the trade secrets to negotiating your way into a solid setup. It’s all about leveraging yourself and taking the time to adapt.
Matt Pell of the Mortgage Warehouse in Fort Myers states “When determining how to get the lowest interest rate it is important to first understand that there is a direct relationship between the interest rate given and cost paid. As a interest rate goes up, costs go down; and as costs go up, the interest rate goes down. This relationship between rate and costs becomes essential when trying to determine the best loan options.” Having the lowest interest rate does not always equate to the best deal, and if a borrower shops around for only the lowest interest rate chances are, they’ll end up with a costly loan. Pell goes on to say “This is why a cost benefit analysis approach is important in order to determine what your return on investment (ROI) will be. Additionally, most borrowers understand that their interest rate is a reflection of their credit score. However, this is not the only variable. A borrower’s loan-to-value (LTV) ratio which determines their equity position and loan amount is also a factor. A good way to offset a less favorable credit score from impacting an interest rate negatively is by having a higher equity position. Lastly, having a higher loan amount gives more margin for lenders to work off of and can allow for additional savings to be passed down to the borrower. As you can see, there is a lot that goes into getting the lowest mortgage interest rate and knowing an experienced loan professional can be a valuable asset.”
This article is going to help pinpoint some of the main options available to applicants. As long as you are using these tips before the mortgage application process, you will be able to get the lowest possible rate on the market. These tips are tried and tested, which is why it’s time to use them to your advantage.
1) Put Down a Large Down-Payment
One of the best ways to get a low mortgage rate is to take the opportunity to use a larger down payment. Lenders want to work with people that have more money in hand as that takes the guesswork out of the process. They don’t have to lean as heavily on your credit score or income as they might have with a smaller down payment. A good client is someone that will be able to give at least 20% as that shows confidence in what is being asked for. Lenders enjoy the smaller risk and that’s what you will want to aim for while hoping to get a lower rate on the loan.
2) Compare Lenders
Don’t just go with the first lender even if that ends up being the right fit! You want to be smart and make sure you are comparing at least 2-3 lenders in the area. This is a great way to see what is out there and understand the process as a whole. Those who assume the first lender is a good one will end up in a bad spot. It can sometimes have to do with lack of experience as you might not know what to ask or how to ask it. By comparing lenders, you can eliminate the risk and get a better deal.
3) Never Accept the First Offer
Most people want to wrap things up and move on with their lives. However, this might be the biggest financial decision of your life and it is not smart to jump in headfirst. You want to be as smart as you can be. This means not accepting the first offer as that is when the lender will be assessing how you respond. Will you be able to accept a higher rate? Will you be able to accept a more restricting agreement? They will test it and that’s where you want to take the time to negotiate.
4) Improve and Leverage Your Credit Score
Your credit score can be empowering as long as you are on top of things. If you are not, the results will fall apart and you are going to hate how things turn out. Too many people don’t leverage their credit score or don’t focus on improving it. The more you improve it, the better your score is going to get with time. This is a battle on its own and you want to focus on it as much as you possibly can. If you improve this, you will be able to get a lower rate without too much trouble.
5) Do Your Research
This might be the most important tip of them all because of the role it has to play in the lending process. You have to do your homework whether it is the rate you’re getting, the details included in the agreement, or your credit score. Everything has to be thought of as soon as possible so you are not left in a tough position as so many others before you. Do your research and learn to adapt to what the market has to offer because there is a great deal out there for those that are vigilant.
6) Understand “Open vs Closed”
There are two types of mortgages. Open mortgages or variable mortgages have fluctuating interest rates based on what the economy dictates. A good economy is going to see a reduced interest rate and this can be beneficial to the client. However, there’s also the risk of seeing the interest rate head upwards. People have to decide whether they want to go down this path or stick with a closed mortgage. With a closed mortgage, you will have a higher rate but it is going to be fixed for a set term (usually 5 years).
7) Get Pre-Approved for Your Mortgage
A lot of people want to get the property lined up before getting their mortgage approved but that’s not ideal. You want to take time with the mortgage process but anyone that doesn’t focus on this will lose out. You have to go for a pre-approved mortgage and make sure it works out for your needs. As long as you do this, you will have more time to negotiate and it’s not going to be as rushed. Plus, you will be able to adapt with regards to the property you’re getting.
8) Ask for Information Immediately
Don’t get lost in the simple details (i.e. interest rate) when there is a lot more at play. You don’t want to be fooled into accepting a setup that will ruin your financial wellbeing. This happens all the time as many people are eager to get anything set up and assume the interest rate is what matters. Yes, the interest rate has a role to play but it comes with various other details such as the credit check, conditions, and type of loan. Being able to look into these tips before implementing them is a good step in the right direction. Most people assume getting a low-interest rate is easy but this isn’t always possible. In fact, there are too many people that end up in bad situations.
People that are as smart as they can be will always emphasize getting a low mortgage rate. You want to take the opportunity to see how these things work before moving forward.