How to Secure The Best Rates on a Conventional Home Loan in Today’s Market
When it comes to securing a mortgage, the difference between a manageable and crippling rate can be a huge financial weight for many homebuyers in today's market.
And a conventional loan (one not guaranteed by the government) is still the most commonly chosen way to own a home, well-known for its relatively straightforward process.
Entering the market without a clear understanding of the factors that affect conventional home loans can leave you at the mercy of an economic rollercoaster and rising interest rates.
Well-known drivers of conventional loan rates are credit history, debt-to-income ratio and the size of the down payment.
You can, however, take the reins by getting your financial house in order, essentially putting yourself in the best position to secure the best possible rate.
Thanks to the residential financial experts at Union Home Mortgage, here are a few tips to get the best rates and terms on conventional loans
Strengthen Credit Before Applying
A higher credit score is one of the first thing a lender looks for, so much so that it is the main determinant of interest rates and most favorable terms.
A few smart moves before applying for a mortgage such as paying off outstanding debt, not taking on new debt and always paying your bills on time, can improve your score quickly.
It's also a good idea to review your credit reports for any mistakes, because even tiny improvements can reduce the cost of your mortgage.
Compare Lenders and Loan Products
When it comes to conventional home loans, the comparison between banks, credit unions, and online mortgage providers can be the best way to find the most competitive deal.
Each of them may have a different way of assessing risk, promotional offers, or lock-in deals that affect the bottom line of a mortgage.
Borrowers, by requesting loan estimates from multiple lenders, can get a clear picture of the most attractive offers.
Working with a trusted mortgage broker can cut through the noise and reveal rate options that aren't available to everyone, while simplifying the comparison process as well.
Choose the Right Loan Term and Timing
Another important aspect to consider is the loan term, the two most popular being fifteen or thirty years. The term establishes the setting of the rate and the total amount of interest that will be paid over the life of the mortgage.
Shorter term loans are cheaper but have higher monthly payments, and longer term loans spread the payments over time with slightly higher interest rates, so you need to weigh your short-term financial situation against the possibility of long-term savings.
One huge aspect of securing the best terms and rates is to have a higher down payment. A minimum of 20% allows you to leverage very attractive terms in most circumstances.
Smart Preparation Leads to Lasting Savings on Conventional Home Loans
If you're looking for the best rate on a conventional loan, there are a few things to keep in mind, and they go beyond just monitoring the market.
Beginning the mortgage process with a strong credit score, a reasonable down payment, and getting the right terms can help borrowers dramatically lower their costs.
Every percentage point you shave off the rate translates into thousands of dollars in savings over the life of a mortgage.
Small, strategic decisions today, like understanding the real estate market and staying financially disciplined will give today's homebuyers the upper hand on securing the best mortgage rates.
