Learn With Mortgage Brokers in Towson: How to Secure a Great Rate
Taking on a mortgage is a long-term financial decision that requires careful planning and research to ensure its success. When working with mortgage brokers in Towson, mapping out your financial status is vastly important as well as developing a comprehensive understanding of the mortgage process. It is much easier to take notice of the down payment and listing price of a home rather than the small percentage that is the interest rate. A few percentage points inevitably add up over the years and can quickly end up becoming a deciding factor on affordability. Thankfully, there are several steps that you can take to lower your interest rates and in turn, make your mortgage experience less of a financial burden.
1. Check Credit Score
Your credit score is the first thing that mortgage brokers in Towson will look at to judge your ability to pay back the loan. A higher credit score shows the lender that you make timely payments on your debts and have a track record to prove it. If you have a low credit score the lender will raise the interest rates to compensate for the lack of credibility. In short, the better your credit score is, the lower the offered interest rates will be. By checking your credit score you can begin to evaluate where you stand and what you can do to increase your score. Having a higher credit score will cause you to save exponentially on your interest rate and is decisive in determining your overall financial expenditure. Once you have an idea of where your credit score sits, you can begin to take the steps to improve it.
2. Improve Credit Score
Having a credit score that is 760 or above means that it fits in the excellent range. To get the best interest rates, you should take the steps to get your credit score closer to the excellent range. Make timely payments and pay off existing balances to improve your credit score. Having a low credit score doesn’t mean you won’t be accepted for a loan, it will only cause your interest rate to increase. Another important tip when applying for a loan is to apply to several lenders in a short period of time so that it only affects your credit score as if you only applied for one.
3. Larger Down Payment
As a general rule, decreasing the expected risk to the lender will cause our interest rate to go down. With that being said, a larger initial down payment will make it so the lender is less liable and in turn, they will offer better interest rates. Typically if you pay less than 20% down on a conventional loan, you will have to pay for private mortgage insurance or PMI. Even if you don’t put 20% down, a larger down payment will decrease the cost of the PMI.
4. Shorter Loan Time
Typically, mortgage loan terms are 15 and 30-year fixed-rate mortgages. Usually, shorter loan terms result in lower interest rates. While this does save a borrower in the long run, they will end up having to pay more monthly. Another option to consider is an Adjustable-Rate Mortgage or ARM. An Adjustable-Rate Mortgage is a good option if you want to start with a low introductory rate and then have your interest rate adjusted after a certain period of time. Typically, the rate is matched with a national index. These carry a little more risk as predicting the change in interest rates is a guessing game.
5. Increase Income, Decrease Debt
Getting a good interest rate means having the best credit score possible. Simply put, one should increase income and decrease debt. While gaining income is easier said than done, a better debt-to-income ratio or DTI will look better to lenders and grant you a better rate. Generally, any DTI over 43% will prohibit qualification for a mortgage loan. Reducing your debt before you apply for a loan is one of the best ways to secure better interest rates.
6. Apply with Several Lenders
Shopping around to compare prices is always a good idea and helps a borrower gain an understanding of the range of offers. Base your desires on your financial situation and find a lender who offers you rates that best suit you. There are a ton of different Towson mortgage brokers competing for your business, do not settle for one that does not have a fair offer.
7. Watch Mortgage Rates Trends
Mortgage rates are constantly changing. This can be used to the borrower’s advantage to get a better interest rate. Lock in your fixed-rate mortgage when rates are trending down. Waiting for this decrease can make a major difference in the long run.
8. First Time Home Buyer Program
Depending on the borrower’s location, different governmental programs offer incentives for first-time home buyers. These include loan forgiveness, down payment, and closing cost assistance, and tax breaks. Using these benefits can help to lower interest rates. Using everything that is at your disposal will help lower interest rates and result in long-term savings.
9. Discount Points
If you plan on keeping your mortgage for a long period of time you might want to consider paying for discount points. A fee paid at closing, and a discount point can help decrease your interest rate. Discuss with mortgage brokers in Towson how discount points can help save you money and what you would be able to afford.
Securing a great interest rate goes hand in hand with choosing a Towson mortgage broker that will work closely with you to get the best deal possible. Thankfully, Federal Hill Mortgage has been helping our clients achieve their home-buying goals since 2006 and is recognized as the number one mortgage broker in Maryland. Contact us today if you want to get expert assistance in your home-buying experience!