3 Tips to Score the Lowest Mortgage Rate - Motley Fool

Here's how to snag a low interest rate on your mortgage -- and enjoy savings for many years.

If you're looking to get a mortgage, your goal should be to lock in the lowest interest rate possible. After all, the lower the rate, the less your loan will cost you each month. And that means you'll have less interest to pay over the life of your loan.

Imagine you're taking out a 30-year $200,000 mortgage. If you lock in a mortgage rate of 3.25%, you'll pay $871 a month for principal and interest on that loan. But if you manage to lock in a rate of 3.05%, you'll pay $848 a month instead. You'll also, with that lower rate, pay a total of $8,000 less in interest in the course of your 30-year repayment period.

So how can you snag the low interest rate you want? Here are a few tips.

Start your journey to financial success with a bang

Get free access to the select products we use to help us conquer our money goals. These fully-vetted picks could be the solution to help increase your credit score, to invest more profitably, to build an emergency fund, and much more.

By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

1. Boost your credit score

The higher your credit score, the more appealing a loan candidate you'll be, which means you're more likely to snag a competitive interest rate on your mortgage. There are several steps you can take to raise your credit score:

• Pay all incoming bills on time
• Pay off a chunk of existing credit card debt to lower your credit utilization ratio
• Correct credit report errors
• Get added as an authorized user on a family member's credit card if your personal credit history isn't very lengthy

Not only can a higher credit score help you get a better interest rate on a mortgage, but it can also make it possible for you to qualify for other attractive financial offers as well, like a credit card with a strong rewards program.

Find out more about credit scores with the following guides:

2. Lower your existing debt

It helps to have as little debt as possible at the time of your mortgage application. This move will lower your debt-to-income ratio, which is a measure lenders use to see whether you have a healthy level of debt given your earnings.

It pays to knock out credit card debt before you tackle other types of debt, since doing so could also improve your credit score. To help with this, try using a credit card repayment calculator. Figuring out your credit card payoff date and how much interest you will pay over different time periods could help motivate you to pay off this debt sooner. From there, aim to pay off personal loan debt and other installment loans (loans with the same monthly payment) if possible.

3. Shop around

Though general market conditions dictate what mortgage rates look like, each individual mortgage lender ultimately sets its own rate. So while one lender may offer you 3.25% on a 30-year fixed-rate mortgage, another may offer you 3.35%. Meanwhile, a third lender could come back with 3.15%. That's why it's a good idea to shop for a mortgage. That way, you can compare your choices and see which deal is the best.

That said, your mortgage interest rate isn't the only thing you should look at when choosing a lender. You'll also want to pay attention to closing costs, which are the fees you'll pay to finalize your loan. You may find that while one lender offers a lower interest rate, its closing costs are higher, thereby wiping out those savings.

The lower the interest rate on your mortgage, the less your home will cost to pay off. Follow these tips to snag a low rate -- and enjoy the savings that come with it.

Adblock test (Why?)

Article From & Read More ( 3 Tips to Score the Lowest Mortgage Rate - Motley Fool )
https://ift.tt/3uZwJrV