Compare Mortgage Rates
Securing the best mortgage rates when you are looking to purchase a new home, or refinance your current one, is of utmost important. By taking the time to research and compare mortgage rates, you can ensure that you do not pay more interest than you should in the long run when purchasing a new home.
Use the table below to compare mortgage rates in the area you are looking to purchase or refinance.
How to Get a Mortgage and for the Best Rate
Those who are looking to buy a home are most likely going to need a loan to finance the purchase. With even the lowest home values at around $50,000, it is almost impossible to buy a home in cash. What do you need to do to get a home loan, and what influences your interest rate?
What Is a Mortgage
The first thing that you should know is what a mortgage is. A mortgage is a home loan that is repaid via installment payments over a period of several years. Typically, the loan term for a mortgage is 30 years. However, it is possible to get a loan term of 10, 15 or 20 years. Most people opt for a 30-year mortgage because it lowers the monthly payment to an affordable level. If you can afford to pay more, you may be able to get a lower interest rate on a shorter-term home loan.
What Are the Different Types of Mortgages Available?
There are several different loan products available to a wide range of buyers. Let's take a look at some of the more common loan types and who they are best suited for.
Conventional Fixed-Rate Loan - A fixed-rate loan offers the borrower the peace of mind that comes with knowing exactly how much your housing payment is going to be each month. Fixed-rate loans are typically offered to those who have good credit and at least a 20 percent down payment.
Variable Rate Loan - Borrowers who have less than perfect credit or don't think that they will keep their home for at least a decade may opt for a variable rate loan. The loan comes with a low interest rate for the first five years in an effort to get the borrower a payment that he or she can afford. After five years, the rate will adjust based on whether mortgage rates are higher or lower than they were when the loan was first issued.
FHA Loan - The Federal Housing Administration (FHA) makes guarantees on home loans issued to borrowers who don't have good credit or have less than 20 percent to put down. Borrowers who opt for the FHA loan are eligible for a home loan with as little as 3.5 percent down. The down payment may be gifted as long as the source of the gift is properly documented. Borrowers who opt for the FHA loan may also be granted a mortgage with a debt-to-income ratio as high as 55 percent or has been foreclosed upon in the last two years. One issue that borrowers should consider is the additional mortgage insurance that will need to be paid if the down payment is less than 20 percent. This payment could equal $100 or more per month until the borrower has paid at least 20 percent of the home's value.
VA Loan - Those who have served in the military may be eligible for a loan without making a down payment at all. Like the FHA loan, borrowing requirements to get a VA loan are much less stringent than those of a conventional home loan.
Who Gets the Best Interest Rate?
When shopping for a mortgage, you want to get the lowest interest rate possible. Let's take a look at the steps that you need to take to make sure that you get the lowest rate on the market when you decide to apply for a home loan.
Clean Up Your Credit - Lenders are typically going to reserve the best interest rates for those who have a credit score of at least 740. Depending on the lender that you use to get your loan, it may be possible to get the best rate or close to the best rate as long as your credit score is higher than 700. Before you apply for a home loan, it is important to get a copy of your credit report. You can get one copy of your credit report once a year. Although your credit report won't tell you what your credit score is, it can alert your to red flags that could be dragging your credit score down. For those who need to use their credit in the near future, it is important to know that missed payments, a high credit utilization ratio and having less than two lines of open credit on your credit report are all things that will scare lenders away. This is because these are three indicators that you aren't responsible with your money and could prove to be a higher risk of default if given a mortgage.
Take Care of Your Debt Situation - To get a mortgage you need to meet certain debt-to-income ratios. Most lenders want to see that your home loan is less than 31 percent of your monthly income and all of your bills put together are less than 43 percent of your monthly income. The good news is that not all debts are going to be counted against you. Child support payments may not be counted against you, insurance premiums that you pay each month are not included in your debt obligations and your qualifying income is based on your pre-tax income. Therefore, you don't have to worry about your tax bill holding your back when it comes time to apply for a mortgage. If you have a debt that you are going to be paying off in the next 10 months, lenders may disregard them when considering your application. For example, if you have nine more car payments before your car is paid off, your lender will consider it paid. With that said, it is important to note that an underwriter may use this or any other debt against you when deciding if you are a good loan risk. Therefore, do your best to pay off as much debt as possible or increase your income before you apply for a mortgage.
A Special Note to the Self-Employed
If you are self-employed, it may be more difficult to get a loan at all let alone one that comes with a reasonable interest rate. Lenders will generally ask to see two years of steady income before approving your application. Those who work for themselves should also note that their income for the past two years may be averaged to create one income number that will be used to qualify for a mortgage.
Combined Applications May Be Your Best Bet
Applying for a mortgage jointly with another applicant could make it easier for both parties to get the loan. Lenders will look at the debt and income of both parties combined when deciding whether or not to approve the loan. Therefore, if your partner or spouse makes $100,000 and you only make $20,000, it may be a good idea to apply jointly to improve your chances of getting the loan.
What to Think About When Refinancing
When refinancing your loan, it is important to understand that you are actually applying for a new mortgage. This means that you may need to pay closing costs and other fees when your application is approved. If you are thinking about refinancing because you want a lower interest rate on your loan, you should consider whether or not the extra fees are going to offset any savings that you see from refinancing to the lower rate. The only exception to that rule is if you are refinancing to a fixed-rate loan from a variable rate loan. This is because it is more likely at this point that rates are going to go up in the future as opposed to going down. For those who are looking for the best rate on their next mortgage, it is important to appear as a low risk to lenders. By keeping your credit score above 700, keeping your debt-to-income ratio low and applying for a fixed-rate loan, you give yourself the best way to achieve that goal. However, it may be possible to get approved for a mortgage at a low rate even if you don't meet the toughest standards. Talking to a mortgage broker or loan officer is the only way to know for sure what you may be eligible for.