5 ways to ensure you're getting the best mortgage rate


When you're buying a home, getting the best possible mortgage rate can have a positive effect on your finances for years to come.

RELATED: 7 clever ways to cut the costs of buying your first home

Depending on how large your mortgage is and how long you stay in your home, it can save you thousands of dollars over the life of the loan.

Look beyond a 30-year fixed rate.

A 30-year fixed rate is the standard loan, but it's not the only option. If you can handle a higher monthly payment, you can save a significant amount over time by getting a 15-year mortgage.

Although you'll pay more each month, you'll get a lower interest rate and be able to pay off your home much quicker. In addition, more of your early payments go toward paying down the principal, according to The Motley Fool.

Improve your credit score if it's low.

It's important to keep your credit score in good shape because it helps determine how many loan options you'll have as well as the interest rate you'll pay. Check your score with each agency – EquifaxExperian and TransUnion – and correct any mistakes. If needed, delay getting a loan until you can improve your score by paying off debt and paying every bill on time.

The Simple Dollar looked at mortgage interest rates based on three different credit rates. The lowest credit score used (620) would cost the borrower more than $99,000 over the life of the loan when compared to a higher score (over 760).

Beef up your down payment.

Most lenders like to see at least a 20 percent down payment in order to get the best mortgage loan rate, according to Forbes. If you pay less, you may have a higher rate since the lender will consider you to be at higher risk of defaulting.

You'll also have to pay private mortgage insurance (PMI), which protects the lender's interests in case you default on the loan.

Get more than one quote.

Most people get just one mortgage quote, consumer adviser Clark Howard says. He recommends shopping around and getting quotes from multiple lenders, including a local bank, a credit union and a few online lenders.

Each inquiry will be recorded on your credit report, so you should get your quotes within a two-week period. That way, it doesn't look like you're applying for multiple loans.

Consider paying points.

Lenders will often give you the option of paying for discount points up front in exchange for lowering your interest rate. These fees are paid directly to the lender, and one point costs 1 percent of your mortgage amount.

The reduction in interest depends on the lender, and you'll need to run the numbers to determine when you'll break even by consulting a mortgage point calculator. If you plan to live in your home for a long time, paying points may make sense, according to Money.


Reader Comments ...


Next Up in Business

Metro Atlanta home prices jump 10.3 percent since last year
Metro Atlanta home prices jump 10.3 percent since last year

The median sales price of a home sold in metro Atlanta last month jumped 10.3 percent from the same month last year, according to a report by Re/Max Georgia. The region’s real estate market slowed as it typically does in the autumn, the number of sales falling from September this year. Compared to a year ago, sales were essentially flat &ndash...
Small Business Saturday focuses on shopping at mom-and-pop stores
Small Business Saturday focuses on shopping at mom-and-pop stores

If Black Friday crowds exhaust you and Cyber Monday feels risky, mom-and-pop business owners in metro Atlanta have a proposition: shop Small Business Saturday. Instead of elbowing your way to that discounted TV at a Big Box retailer this weekend, you should patronize independent shops, where you can slow down, get one-on-one service and perhaps find...
Lawsuit charges Equifax failure is already costing consumers
Lawsuit charges Equifax failure is already costing consumers

Consumers from across the country have joined in a class action lawsuit against Equifax, arguing that the company’s failure to protect their data earlier this year has already led to misuse of the information. The suit, filed in U.S. District Court in Atlanta, alleges that data taken from Equifax has been used in a series of frauds, from attempts...
Hartsfield-Jackson to reduce land for hotel, give rent discount
Hartsfield-Jackson to reduce land for hotel, give rent discount

Hartsfield-Jackson International Airport will give a $500,000 annual discount on rent to the developers of a hotel next to the terminal, as a concession for reducing the amount of space for the hotel by a couple of acres. The airport on Monday got Atlanta City Council approval for an amendment to its 50-year lease with Majestic Carter Atlanta...
Hartsfield-Jackson preparing for record holiday crowds

With record traffic expected at Hartsfield-Jackson International Airport over the Thanksgiving period, crowds are already filling the terminals and concourses of the world’s busiest airport. More than 299,000 passengers passed through the airport Wednesday, based on Hartsfield-Jackson forecasts. Thanksgiving Day itself will be slow at the airport...
More Stories