Purchasing a home is a momentous decision. As a potential homeowner, you must ensure you’re equipped with the knowledge to get the most advantageous 30-year fixed mortgage rate. A slight change in the rate can translate to savings worth thousands throughout your mortgage. Let’s explore ways to navigate this.
Understanding the Impact:
Each percentage point of interest could mean a significant difference over the life of a 30-year mortgage. For instance, saving $200 monthly due to a lower interest rate equates to $72,000 over three decades. Invest that saved amount at an average return of 6%, and you would accumulate a fund of over $196,000.
Steps to Securing a Favorable Rate:
Boost Your FICO Score:
- Regularly pay bills and maintain balances on credit cards within 20-30% of their limits.
- Clear derogatory reports like collection accounts or liens from your credit report.
- Abstain from making significant credit purchases before mortgage pre-qualification.
Amass a Substantial Down Payment:
- While 20% is the conventional requirement, programs like FHA and VA loans may require a smaller down payment.
Establish a Stable Earnings and Employment History:
- Whether self-employed, salaried, or both, ensure you can present at least two years of consistent earnings in line with your mortgage requirements.
Consult Multiple Lenders:
- Various lenders offer varying interest rates and terms. Partner with an independent mortgage broker who can shop from multiple lenders using just one application and a single credit check.
The Power of an Independent Mortgage Broker:
One of the most significant advantages of working with an independent mortgage broker is their capacity to provide accurate rate comparisons from multiple lenders without repeated credit checks. Given that mortgage rates depend on factors beyond your FICO score and the property’s Loan-to-value (LTV), like the Debt-to-income (DTI) ratio and available credit ratio, a broker can make precise assessments with your complete application.
The broker’s tie-ups with multiple lenders through the wholesale channel permit the re-issuance of the same credit report, sidestepping the need for numerous hard inquiries on your credit.
Locking in Your Rate:
With the best mortgage rate and clarity on loan terms, consider securing your rate during the closing procedure. Many lenders offer this service for free or a minimal one-time fee if you wish to buy down to an even lower rate.
While the journey to homeownership can seem intricate, you can position yourself to secure the most advantageous 30-year fixed mortgage rate.
