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  • Writer's pictureAlyssa Soles

10 Ways To Get a Lower Mortgage Rate


Happy couple moving into home after getting a lower mortgage rate.
10 Ways To Get a Lower Mortgage Rate

10 Ways To Get A Lower Mortgage Rate


Getting a lower mortgage interest rate can lead to significant savings over the duration of your loan. From purchasing mortgage points to selecting the appropriate loan term, this guide outlines 10 ways to lower your mortgage interest rate, potentially helping you save thousands of dollars over the life of your loan. Let's dive in!


1. Boost Your Credit Score

Your credit score plays a crucial role in the interest rates you’re offered. Higher scores typically mean lower rates, as they indicate you’re a lower-risk borrower. To improve your score, ensure you pay bills on time, reduce your debt, and check your credit report for any mistakes you can correct.


2. Make a Larger Down Payment

A larger down payment reduces the lender’s risk and can often result in a lower interest rate. Additionally, a down payment of 20% or more usually eliminates the need for private mortgage insurance (PMI), which can reduce your monthly mortgage cost.


3. Buy Mortgage Points

Mortgage points are fees paid upfront to the lender in exchange for a lower interest rate. One point costs 1% of your loan amount and can reduce your interest rate by approximately 0.25%, though this can vary by lender.


4. Shop Around and Compare Offers

Interest rates and terms can vary widely between lenders. It’s important to compare offers from different lenders to find the most competitive rate available. (Castle Funding will shop lenders on your behalf - learn more about that here)


5. Temporary Buy Downs

A temporary buy down is when another party in the transaction, i.e. the seller, realtor, or lender, pays a lump sum to reduce the buyer's interest rate temporarily for the first 1-3 years of the loan.


6. Shorter Loan Terms

Lenders often provide lower rates for shorter loan terms. For example, a 15-year mortgage usually has a lower rate compared to a 30-year mortgage. Although the monthly payments are higher, the overall interest paid over the life of the loan is significantly less.


7. Improve Your Debt-to-Income Ratio

This ratio compares your total monthly debt payments to your gross monthly income. Lowering your debt-to-income ratio by paying off debts can make you more attractive to lenders, potentially leading to a better interest rate.


8. Consider Different Loan Types

Different types of loans, like fixed-rate, adjustable-rate, FHA, VA loans, and Jumbo loans come with varying rates and terms. Government-backed loans, such as FHA or VA loans, might offer better rates, especially for those with lower credit scores.


9. Time Your Rate Lock

Mortgage rates fluctuate with the market. Locking in your interest rate when rates are low will protect you from potential rate increases while your loan is being processed.


10. Build a Strong Financial Profile

Showing financial stability through consistent employment, a steady income, and responsible financial habits makes you a less risky borrower. Lenders might offer you better rates if your financial situation appears stable and secure.


Conclusion

In conclusion, there are many ways to lower your mortgage rate, which can lead to significant long-term savings. Prior to purchasing, do everything you can to improve your credit score, keep your debts low, and build up your savings for your down payment. Once you are in the loan process, work with a skilled mortgage professional who will advise you on the best loan products and strategies. including when to lock your rate and whether to buy it down with mortgage points. Every little bit helps, and the effort you put in now can pay off with substantial financial benefits over the life of your loan.


WANT A BETTER MORTGAGE RATE? CASTLE FUNDING CAN HELP!


We are mortgage advisors 100% committed to providing you with transparency and the absolute best service you can find in this industry. 


  1. WE SHOP among various lenders to find you the best rate/program.

  2. WE ADVISE on ways for you to save via debt restructuring or improving your credit score.

  3. WE COMMUNICATE with you and your realtor about offer strategy and timelines.

  4. WE ARE THE ONE POINT-OF-CONTACT between you and the lender. No waiting on hold or getting transferred to different departments.

  5. WE CONTINUE to work for you long after your loan has closed. We conduct frequent mortgage reviews and are always a text, call, or email away.

Bob Neilson and Alyssa Soles, Owners of Castle Funding Corp., your local mortgage brokers.

We look forward to offering you the most competitive rates and customized personal attention–it’s what you and your family deserve!


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