As many homeowners know, getting the lowest mortgage rate is not possible for everyone. Before a lender will approve a mortgage, the applicant must comply with the conditions necessary to earn that low rate. If you are thinking of applying for a mortgage in the near future, here are some of the things you need to do in order to qualify for the lowest mortgage rate possible.
Your efforts to obtain a low mortgage rate actually begin long before you ever fill out that first mortgage application. In order to broaden your appeal to lenders and thus expand the number of options you have, it is a good idea to take a close look at your credit report and your resulting credit score. Lenders do look very closely at how you have managed money in the past, and rely heavily on the data found on those reports. It is to your advantage to make sure what they see is accurate and up to date.
Keep in mind that reviewing one credit report is not enough. Many lenders will review at least two if not all three of the reports prepared by the main three credit reporting agencies: TransUnion, Experion, and Equifax. Because some of your creditors may report to one or two agencies but not the others, there is every chance that each of the three reports will contain information that is missing from the other two.
If you really want to get a low mortgage rate, you will obtain a copy of each of your credit reports and go over them in great detail. Look specifically for information that is outdated or that is incorrectly reported. Credit reporting agencies receive the data and apply it accordingly; they do not qualify it in terms of accuracy. This means you are responsible for making sure what potential lenders see on those reports is correct and does apply to you.
Along with making sure the data on all your credit reports is up to date; mine the information for clues on how you can improve your credit score. For example, you may find that by paying off the small balances you carry on a couple of credit cards that your score will go up a few points. Retiring a small loan before it is due will also help to enhance your score slightly. Anything you can do to bring your income to debt ration into a more favorable position will have a positive effect on your credit score and thus increase your chances of obtaining a better interest rate on a new mortgage.
Once you have your credit reports in good shape and have done all you can to lower your current debt, it is time to start looking at mortgage deals. Donít make assumptions about which type of mortgage is best for your needs. Take the time to learn about the benefits of a fixed rate mortgage, as well as explore the different levels of adjustable rate mortgages on the market today. Knowing what is out there will make it much easier to evaluate the plans offered by a specific lender, as well as put you in a position to ask key questions when you meet with the lender to discuss your application.
If at all possible, spend time obtaining quotes from as many different mortgage lenders as possible. There are several reasons for this type of activity. First, it is much easier to determine if a given deal is really that good in terms of rate and terms if you have several similar deals to compare it with. While all lenders have to comply with government regulations that apply to providing mortgage services, some lenders will offer benefits such as longer grace periods, or options to switch from a fixed to variable rate at different points in the life of the mortgage. Knowing what you could get with different lenders helps you sidestep situations where the lender has a low mortgage rate but applies an array of charges and fees that end up costing a lot of money over the life of the mortgage.
Second, knowing what you can get with one lender may help you in your negotiations with lenders who you think are the best candidates for your needs. In spite of the current state of the economy, a customer with excellent credit still has a chance of securing a rate lower than any published rates, if he or she can prove another lender is willing to beat the rate currently on the table. If you have documentation to prove that a direct competitor wants your business bad enough to offer the same favorable terms along with a lower rate, the lender you are speaking with may consider it worth his or her time to match or even exceed that offer.
There are to key elements to getting the lowest mortgage rate: knowledge and a solid credit rating. If you educate yourself on what rates are out there, and possess an excellent credit score, there is every chance that you will be able to lock in a low mortgage rate. The time you spend on the front end can pay off in a big way in the years to come.
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Wesley Pritchard is a freelance writer who writes about the mortgage industry, often focusing on a specific topic such as mortgage rates.
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