6 Ways to Lock in a Lower Interest Rate

If you are preparing to buy a new home or to apply for a refinance loan, you may be paying close attention to interest rates. For years, mortgage rates have been excitingly low, but the Federal Reserve has been hinting that a rate increase is in the near future. A rate hike would impact the maximum loan amount you qualify for, your new mortgage payment and other factors. What can you do to secure a lower interest rate if rates jump higher?

Pay Discount Points
Perhaps the easiest way to lock in a lower interest rate is to buy the rate down with discount points. Whether you are applying for a purchase or refinance loan, you can pay an upfront fee to secure a lower interest rate for the life of the loan.

Make a Larger Down Payment
In most cases, there is a slight right increase for higher loan-to-value ratios. This means that making a larger down payment could result in a better interest rate. If you are applying for a refinance loan with a higher loan-to-value ratio, you can simply request a lower loan amount or wait for your home’s value to increase slightly.

Increase Your Credit Score
Before applying, take a moment to review your credit scores online. Lenders generally have a tiered rate grid that is based on the applicant’s credit scores. By increasing your credit score, you could easily qualify for a better rate. Some ideas are to reduce credit card balances and to pay off accounts that have a small outstanding balance.

Choose an Adjustable-Rate Mortgage
Many mortgage applicants apply for a 30-year fixed-rate mortgage because of the security that it provides. However, interest rates are lower with adjustable-rate mortgages, or ARMs. While an ARM can secure a lower interest rate initially, the rate will eventually adjust. This means that you could save money today, but you may wind up with a higher mortgage payment down the road if rates do increase.

Shop Around
When the Federal Reserve makes an adjustment, all lenders increase their interest rates. However, this does not mean that all lenders have the same rates. Shopping around could help you to find a slightly lower rate and to save money on interest charges throughout the life of the loan.

Be Patient
Interest rates could decrease in the months ahead. It is difficult to accurately project movement one way or another. Because of this, taking a chance that rates may decrease could pay off in some cases.

Do you want to explore your mortgage options today? Contact a loan rep at MortgageDepot today to learn more.

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