If you’ve been waiting for mortgage rates to drop, now is a great time to take a closer look. This past September, the 30-year fixed mortgage saw its biggest one-day drop in more than a year, according to CNBC. That’s good news if you’ve been hesitant to buy because of higher rates. While rates are still around 6.29 percent, they are trending downward. And even if the rate isn’t exactly where you want it when you buy, there are steps you can take to qualify for a more competitive mortgage.
Here are three practical ways first-time buyers can improve their chances of securing a favorable rate:
1. Boost your credit score
Your credit score is one of the biggest factors in determining your mortgage rate. Higher scores can save you thousands over the life of your loan. According to Scott Lindner, national sales director of real estate and secured lending at TD Bank, borrowers with scores over 780 may see rates near 6.19 percent, while scores between 700 and 739 could face 6.39 percent. On a $350,000 loan, that difference could add up to $13,000 (LendingTree data). That’s a significant difference!
So what can you do to raise your score? Try these tips!
- Pay all bills on time, even the minimum amount due
- Keep credit card balances below 30 percent of your limit
- Correct any errors on your credit report
- Consider asking for a higher credit limit if you can manage it responsibly
2. Save up a larger down payment
Putting more money down at the start of your home purchase can help you secure a lower interest rate and may even reduce or eliminate private mortgage insurance. Even adding a little extra to your down payment can save you thousands in interest over the life of your loan.
3. Explore different mortgage options
As a first-time homebuyer, a 30-year fixed mortgage isn’t your only option. Adjustable-rate mortgages, or ARMs, often start with lower rates than fixed loans, sometimes by as much as half a point. If your first home isn’t your forever home, an ARM can be a wise choice. It can help you save money in the first few years, especially when expenses are usually higher, especially if you plan to move or refinance within a few years.
Tips for choosing a mortgage type:
- Think about how long you plan to stay in the home
- Consider the risk of rising rates with ARMs
- Compare potential savings with fixed-rate loans
Even with current rates, homebuyers have ways to make purchasing a home more affordable. Focusing on your credit score, saving for a larger down payment, and exploring different loan options can help you find a mortgage that fits your budget and lifestyle. Ready to get started? We help you explore mortgage options tailored to your needs. http://azeliteteam.com
