How can I get a lower mortgage rate
There are many ways to receive a lower mortgager interest rate. You can buy the rate down by paying points, you can refinance after your house has earned equity or by increasing your credit score.
Often, you can get a lower rate by choosing an Adjustable Rate Mortgage. The average homeowner lives in one house for less than 5 years. Adjustable Rate Mortgages that are fixed for 5 years before adjusting have a slightly better rate than 30 year fixed mortgages.
One way to get a lower rate on your mortgage is to obtain a mortgage on a buy-down program. A 2/1 buydown is a common type of buydown program. What this means is that you will have pay a fee to be able to get an initial interest rate that is 2% lower than the final interest rate for the first year of the loan, the next year the rate will go up 1% and then the 3rd year the interest rate will be fixed for the life of the loan. This type of loan helps out people who are very close to their maximum debt ratio that is permitted by the bank, and also people who may want to qualify for a little more expensive of a home.
The general rule to refinancing is that when you are able to lower your interest rate by more than a percentage point, you will exceed the cost to savings ratio.
You can shop 3 different Mortgage Brokers for the lowest interest rate. Shopping more than 3 could damage your FICO score. Usually the Mortgage Broker with the lowest interest rate has higher closing costs.
If you bought your home with 100% financing and have a PMI payment you may now have enough equity to refinance to a lower rate and eliminate the PMI payment. If you bought a new home in the last 3 years and your rate is over 7% you should call your mortgage broker and talk to them about refinancing to a lower rate and what your options at this point are.
Getting a lower rate often comes with a substantial cost, and may not result in getting a lower payment. If your real goal is to minimize your monthly payment, talk to your mortgage professional about options which may allow you to minimize your monthly payments.
If for some reason you can not get a lower rate, because you do not qualify for one, then you may be able to get a lower mortgage payment. You can lower your payment by taking an interest only loan, increasng the amortization schedule (15 year fixed to a 30 year fixed), or in some cases a pay option ARM.
If you are purchasing a home one way to get a better rate is to put more money down. If you put more money down, the bank is taking less risk so the rate is lower.
If you opt to escrow your taxes and insurance your rate may be lower. Having the bank collect for taxes and insurance on a monthly basis and pay them when their due elevates one more concern and possibility for additional liens or foreclosure, so again there is less risk so a lower rate.
You may be able to seek out credit repair, prioe to obtaining a new mortgae loan. This could drastically and quickly (Depending who you use) change your credit score, and put you in a position to achieve a lower mortgage rate than you were previously quoted.