How you can find the best interest rate
How many shoppers do you know who like to pay more than necessary for any item? I’d bet the same mindset applies for people shopping for a home loan. So it’s a good idea to do a little comparison shopping for a mortgage, and you could potentially save a huge amount of money over the life of your loan.Get ready…
Before you even begin shopping for a loan, you should visit AnnualCreditReport.com to get a free copy of your credit report. Be aware that while the report itself is available at no cost, there may be a fee to receive a credit score from each of the three bureaus: Experian, Equifax, and TransUnion.
What you want to focus on is the middle credit score from the three bureaus, because that is the criterion generally used by mortgage lenders to work out your interest rate. A better credit score means a better interest rate on your loan, so look for any errors in your credit report and act to get them cleared up at least a couple of months ahead of when you plan to begin your home search. Even small corrections to your credit profile could shift your score and result in an improved interest rate on your home loan.
Top Tip: Try to restrict your rate-shopping to a 14-day period. During this time, you can have your credit checked by an unlimited number of lenders without negatively affecting your score. Too many credit inquiries outside this period may start to negatively affect your score.Start shopping
Accurately comparing rates from lenders is going to depend on the information you provide. That’s why you need to provide a “personal mortgage profile,” including:
- Your middle credit score — not your highest or lowest score (This helps determine your FICO score – learn more here.)
- The city and state where the property you want to buy is located
- Your available cash down payment and equity in other real estate holdings
- The loan amount
- The type of property: single-family home, townhouse, condo, duplex, etc.
- The proposed use of the property: a primary home, vacation/second home, or investment/rental property
- The amount of points you’re willing to pay (if any) to lower your interest rate
- The interest rate lock-in time frame
- Lenders are required to disclose the criteria associated with their advertised interest rates.
- These criteria are typically based on a 740+ FICO score, a 20% cash down payment or equity in other real estate, and the purchase being for your primary home.
- If your profile varies from the lender’s criteria, your interest rate will likely differ from their advertised rates.
A little homework and some shopping around can help you find the best interest rate for your home loan. These steps may help you be sure you’re not paying more than necessary!