Q&A: How can I get a lower rate?

One of the questions I hear from clients most often is ‘how can I get a lower rate on my mortgage?’ It’s a great question and one of the most important ones to ask before you sign on for a long-term mortgage. The good news here is that there are numerous ways that you can earn a lower rate for your mortgage. And believe me, it’s worth the time and effort so you can keep more money in your pocket each month. Here are the top ways you can get a lower rate on your mortgage:

  1. Increase your credit score – Do you know your credit score? If not, give me a call and I can run a credit report for you. If you have 740 or higher FICO score you will likely be eligible for the best rates. If your score is below 740, use that as your goal and begin building healthy credit and over time your score will go up. By paying your bills on time and in full, paying down debt, and cleaning up any overdue or delinquent accounts that appear on your credit report your score will rise over the next 6 to 12 months.

  2. Decrease your loan-to-value ratio – This means that the more money you can put down as your down payment on the purchase of a home the better, in order to earn a lower rate. You will be a decreased risk to your lender if you have more ‘skin in the game,’ so to speak, so shoot for a 20 percent down payment for your primary residence or 25 percent down for an investment property if you want to get a lower rate.

  3. Purpose matters – Have you ever seen or heard an ad about mortgage rates that sound super low and then when you get quoted a rate for ‘your scenario’ it’s much higher? Keep in mind that the purpose for your loan will affect your rate. The lowest rates are typically for purchase of a primary residence. If you are refinancing it will be a bit higher and if you are seeking a cash-out refinance, it will be a little higher still. So, I always tell clients that are shopping for a low rate to make sure they are comparing apples to apples when it comes to rates and loan programs.

I hope this helps explain what can be a pretty complex answer. If you have any other questions on this subject or any other, please drop me a line or reach out in the comments below. And remember, I’d love to help you find the mortgage and the rate that will work best for you and your scenario. There are so many different programs to fit lots of different situations so please call me when you are ready to explore getting a mortgage and I’m happy to help!



P.S. Of course, rates, credit scoring guidelines and loan guidelines change regularly so please reach out to me for the most up to date information and suggestions specific to your situation.