Mortgage Rate Primer

A Home Buying Article Contributed by Cindy Mcnatt

Don't Settle for a High Mortgage Rate

The word is out and people are flocking to refinance their mortgage before interest rates soar out of sight. How can you obtain a better mortgage rate?

First, obtain your credit report. Experian, Trans Union, and Equifax are the keepers of your credit report. Get a copy from each agency and check it for errors, omissions and make sure all the facts are correct. While you are at it, get your credit score (FICO) score as well. If you find errors in one or more of your reports, contact the agency which provided the report and let them know of the problem. The agency will investigate and can remove the error if you document that the item in question has been paid, etc.

Obtaining the Best Mortgage Rate

In the interest of making the lending business more equitable, lenders rely heavily on your FICO score. The higher the score, the better your interest rate will be. You can obtain further information by searching the internet for FICO score. Credit scores that are higher than 700 generally receive the best interest rates, so you may have to work on credit repair to improve your score.

Pay down credit cards, make sure all monthly bills such as car payments, your current mortgage and department store accounts are paid on time. Even one late payment can lower your score. Checking your credit report yourself does not lower your score, so you may periodically check your score for improvement. Note though it takes time to build a good credit score. Do not apply for more credit cards or open other accounts if you suspect your credit will be denied as this will also affect your score.

If you should close an account, make sure that the creditor notes that the account was closed "at customer's request". Once your credit score has improved, begin researching lenders to obtain the best mortgage rate you can find.

It Pays to Shop around for Mortgage Rates!

There are several businesses that will allow you to fill out one application and then they submit the application to several lenders which then "compete" for your mortgage business. This can save you hours of research as the lenders "come to you" for business instead of the other way around. If you are on good terms with your local bank, credit union or savings and loan, that is also a good place to negotiate your mortgage rate.

After all, these folks are familiar with you and your banking habits so may make the process easier. On the other hand, using a nationwide lender can be advantageous as they may offer more loan options such as zero interest, no points or low points, and a variety of term lengths which may suit your needs better than a local bank. Once you have found the lender with the best mortgage rate, sign an agreement to "lock in" the rate until you can close your loan.

Locking in the mortgage rate will save you money should the interest rates rise.

Establishing good credit or repairing bad credit, shopping for a lender and locking in your mortgage rate are all proven methods of getting the best interest rate for your new loan.