Applying for a home loan program is the easiest way to ensure financial aid for buying a home. Although there are various home loan programs, you would always like to opt for the one that has a lenient requirement. Besides, you want to get the best mortgage rate as with this, you can save a lot over the life of the loan.
Although every home buyer wants to ensure the best mortgage rates Houston, only a few can do so. It is because most of them are not aware of the tricks that help them get the lowest rate. Here, we have discolored a few for you –
- Work on your credit score
Is your credit score around 500? Then, you need to work on to boost your credit score. How to do so? Well, take some steps to pay down your balances and make all your payments on time. Having excellent credit makes you eligible for the best mortgage rates. You can use a mortgage calculator to estimate how much you could save on your mortgage by boosting your credit score. In case you are putting down less than 20% on a traditional home loan program, excellent credit will also make you eligible for the lowest mortgage insurance rates. However, if you have had bad credit, you might be surprised by your loan options. Save up for a decent down payment
- Save up for a decent down payment
When you come with a lower down payment when applying for a home loan program, the lender considers you a higher-risk borrower than someone who makes a larger down payment. When you put down less than 20% on a traditional home loan program, you will usually pay PMI requirements. Until you have enough equity to cancel it, PMI will affect you the same way a higher interest rate would – by boosting your monthly payment and your total borrowing costs. Saving up for a huge down payment can help you avoid PMI altogether. If it is not possible for you to put 20% down, you can pay less for PMI with a larger down payment. Besides, with a larger down payment, you can ensure the lowest interest rate.
- Check a shorter loan term
When you take out a 15-year fixed-rate mortgage instead of a 30-year fixed-rate mortgage, your interest rate might be lower. Besides, you can also consider an adjustable-rate mortgage. Its introductory rate may be lower than what you could get on a fixed-rate home loan. But it depends on the market. Even if you can get a lower rate on an ARM, you are taking a risk. It can be cheaper in the short term, but more expensive in the long-term. No one actually knows what interest rates will look like when the ARM’s introductory period ends. There is no guarantee you will be able to refinance or sell when the ARM’s introductory period ends.
So, take steps to improve your credit score, come with a good down payment amount, and check for a shorter loan term to get the best mortgage rate.
