Bringing down your mortgage rates is just one of the most important fiscal movements you can make. Just a quarter point of interest difference can save thousands of dollars over the life of a loan. Lower the
mortgage rate with a full point and you may save tens of thousands of dollars over a thirty year loan. There are, however, some good ways to get decreased interest rates on a mortgage and a couple of terrible ways.
One bad way is by paying for discount points. Such points are paid up front to the financial institution at the time of closing as portion of your total closing prices. The way in which they work is you pay up front for a lower interest rate for the life of the loan. The math works out in your favor, it's accurate, but only if you keep the mortgage for the full life span of the loan (say thirty years.) If you lose or drop the mortgage then the bank gets more cash out of you and they get this money up front instead of through the life of the mortgage. Terrible idea for you, wonderful idea in their opinion. For more info see: morgage rates (
http://www.todaysmortgagerates.org)
Another bad idea is by signing up for an unusually long mortgage term. Most people are comfortable with thirty year mortgages. They are so familiar with them that they do not think about the distinction it might make for them all to obtain a smaller term mortgage. Unfortunately what some banks might try to do, however, is sell you on the longest mortgage period they could convince one to do. There are even forty year mortgages available. Forty years! Now this does not normally decrease your mortgage rate. Actually it raises it. Many people though, don't know to look at mortgage rate as interest points. Instead they believe lower monthly payments are the same thing. Not the case! because you reduce your monthly repayments by spreading out the loan does not mean you're saving money. You are likely paying thousands of dollars of additional interest over the life of the loan.
Now you probably want to hear about some good ways on how to reduce your mortgage rates. One way is by raising your FICO (credit) score. There are basically three areas of information that are used to determine your score: payment history, debt to credit ratio, and mix of credit. Should you improve every one of these three areas you will boost your credit rating and lower your mortgage rates. Check your free credit report (you get one free one each year) and see if there are any damaging marks in your payment background. If there are fake ones, get them corrected by contacting the merchant. If there are previous late payments see if you could get a good will act by the lender due to recent loyal payments. For debt to credit ratio, keep your balances low and pay them off on a monthly basis. Do not max out your cards, and try to maintain your loan-to value ratios low on mortgages. With regards to credit combination, it's a good idea to have some installment loans (autos and homes) as well as revolving credit (cards and other monthly debt) rather than only one or the other. Too much of either sort makes you look unsafe.
Another good idea would be to raise your liquidity. Banks like to see money on hand. Liquid money is just a buffer zone. It's flexible and allows one to bear unanticipated emergencies and difficulties. In the event that you only have enough cash on hand to protect your down payment and closing costs you'll be looked at as a riskier customer. Think about waiting to purchase your house until you can deplete some CD's without paying a fee, sell off some stocks at a higher cost, or simply save up some more cash in an interest bearing savings account (shoot for something over 3%).
A final good way would be to raise your deposit. Twenty percent down not only drastically reduces your mortgage rates it also eliminates private mortgage insurance. The lender knows that a foreclosed residence can generally sell for over twenty per cent of the value of the home fairly quickly. So, the worst case scenario on a traditional loan with a twenty percent down payment is they come out even. Go for less than 20 percent and they'll add on higher mortgage rates to make up for their hazard. This aside, don't increase your down payment to the point that you shed your liquidity. If you do this, then a leading repair can deliver you in to foreclosure.
