Mortgage interest rates have increased significantly since the recent lows. If you're in the market for a new home, now is a great time to buy. But how can you get the best interest rate on your mortgage? Here are a few tips.
1. Check your credit score and make sure it's as high as possible 2. Compare interest rates from different lenders 3. Shop around for the best mortgage deal 4. Pay off your debts and improve your credit score 5. Consider a shorter-term mortgage to get a lower interest rate
Request the Seller to Buy Down your Rate
First time home buyers, now's your chance! Competition to purchase a home has lowered significantly which means that sellers are more willing to give. I have personally helped buyers get anywhere from $10k-$90k below list price right now. It is still a sellers market here in Birmingham Alabama but there is so much more opportunity to negotiate. I recommend asking for a price reduction and for the seller to buy your interest rate down.
What is a rate buy down?
Meg Hicks with Movement Mortgage explains: The temporary 2/1 rate buy down is a great incentive for homebuyers in the current housing market. This program allows buyers to have a lower monthly mortgage payment the first 2 years in their new home. The first year monthly payment is based on 2 points lower than the current mortgage rate and the second year payment is based on 1 point lower than the current mortgage rate. This allows the buyer to save hundreds to thousands of dollars the first 2 years of their home loan. If a buyer locks their rate at a current rate of 7%, their payment is based on 5% in year 1 and 6% in year 2. In years 3-30, the payment reverts to the original rate of 7%. During the first 2 years, If the buyer still qualifies, they can refinance into a lower rate mortgage if rates drop.
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Other tips to get a lower interest rate on your mortgage
And as you research interest rates, remember that there are ways to get a lower rate than what you may be offered initially. Here are four tips to help you snag a low mortgage interest rate:
1) Have an excellent credit score – This is key, since lenders will look at your credit score when deciding whether or not to give you a low interest rate. Make sure you keep your credit score in good shape by always paying your bills on time and keeping your debt levels low.
2) Ask for a discount – If you’re already working with a lender, ask them if they can offer you a lower interest rate than what appears on their website or in marketing materials. They may be willing to work with you if they think they could lose your business otherwise.
3) Compare offers from multiple lenders – It never hurts to compare rates from different lenders before making a decision. Sometimes, one lender may have better deals than another depending on your qualifications.
4) Consider using a broker – A mortgage broker can often find better deals for their clients because they have access to many different lending institutions. If saving money is important to you, using a broker could be the way to go.
Congratulations on your decision to buy a home! You’re about to embark on one of the biggest (and most exciting) adventures of your life. As you start the process, it’s important to get pre-approved for a mortgage so you know how much house you can afford. Please contact us if you have any questions or need help getting started.
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