Need to buy a home? Loathe the current interest rates? With interest rates over 7% who can blame you? Fortunately, there are some tricks you can use to get your interest rate down.
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1. Agents matter
Find an experienced agent who has weathered the roller coaster of rising and lowering interest rates and the up-and-down housing market. They often have a lot of tricks up their sleeves to help home buyers counter currents rate. They have also worked with and have built relationships with a number of experienced and knowledgeable lenders who can point out the various ways you can counter high-interest rates now or in the future. Be selective with whom you choose to be your real estate agent.
2. Lenders matter
Get a lender referral from your trusted agent as well as friends. Lenders who have a relationship with a particular agent will often bend over backward to help that agent’s clients find a loan that will work with their current circumstances.
First-time buyers
You will have an advantage if you are a first-time home buyer. There are federal programs that are unique for people looking to buy their first home. Check with the Housing and Urban Development and look into the Downpayment Toward Equity Act and the LIFT Act.
You could be approved for special interest rates and other incentives like:
- grants for closing costs
- lower down payments (5% or less) or no down payment
- discounted rates
- less strict approval requirements
- lower terms for different professions (e.g. healthcare workers, teachers, government workers)
Many states as well as local governments also offer incentives too, so talk to your agent about the possibilities. For example, the HomeReady loan provides lower mortgage rates and costs for those home buyers whose incomes are classified as low to moderate. Ask 616 REALTY agents about your options; they have experience with all types of lender options and loans.
Get multiple quotes
Try to get more than one quote from more than one lender. This will create a little competition to help you get the best interest rate and loan terms possible.
3. Beef up your credit score
As you know the higher your FICO score, the better your chances are for preapproval. But did you know that if you can significantly improve your credit score, you can also lower your interest rate?
To help your score, you can:
- Check and make sure that there aren’t any errors in your credit history and try to rectify any errors
- Pay bills on time and pay any past-due bills
- Reduce credit card balances
- Request higher credit card limits
- Get a secured credit card
4. Utilize mortgage discount points
A mortgage discount point can be purchased at 1% of the loan amount. Each point purchased could potentially lower your mortgage by a quarter of a percent. You can expect lenders to offer the point option before they lock your rate.
5. Put more money down
By putting down more, you greatly improve the chances that your lender will lower your interest rate. So save, scrounge, and borrow as much as you can!
6. Shorter term loan
The shorter the term on your loan, the lower your interest rate. The bad news is a higher payment. If you can do it, GREAT! Just don’t get so financially strapped that you become house poor causing a whole other kind of stress.
7. Consider an adjustable-rate mortgage
An adjustable-rate mortgage, also known as an arm, is a mortgage where the interest rate varies after several years, typically five. An ARM affords lenders the ability to share the rate risks with the home buyer. The ARM will adjust with the market after 5 years and every subsequent year. Typically the interest on an adjustable-rate mortgage will be one percentage point lower than the 30-year fixed rates. Discuss this option with your lender, and see if it is an option that is right for you.
When you need a home, you need a home. And, let’s face it, rent isn’t cheap, and you don’t build up equity. These are just a few tricks to explore with your real estate agent and your lender. for countering those high-interest rates. Investing in a home, in real estate, has rarely been a bad idea. Contact us and we will talk you through the many options lenders have and help you find a place to call home.