How to get a Lower Interest Rate on your Home Loan
Video Transcript (Edited for Clarity):
As you may know, in 2022, rates jumped after several years of historic lows, and they’re now slightly above average as compared to where rates have been over the course of the last 30 years. Since we all got really spoiled with those super low rates, many current homebuyers in today’s market are wondering if there’s anything they can do to get a lower interest rate.
So here are our top three ways.
Tip#1 – Buy Down Your Rate
You can do this with discount points, which is a percentage of the loan amount that you pay as a fee at closing. This lowers your interest rate over the life of your loan.
You can also ask your lender about a 2/1 buydown, which again allows you to pay a lump sum at closing to lower your interest rate for the first two years of your loan.
Tip #2 – Shop Around with Different Lenders
There can be a huge variation in the rates that are offered by different lenders. You want to find a lender that you can trust, so you make sure that you’re getting the best deal and that you’re not getting taken advantage of while you’re shopping.
You don’t want to just compare the interest rate. You also want to compare the closing costs, the PMI costs, and whether or not you’re paying discount points to get that rate. Compare everything so that you make sure you’re finding the best deal for you.
Tip #3 – Improve your Credit Score
Many people don’t realize this, but the rates that you are offered as a home buyer depend on your credit score.
The higher your score, the better the rates that you’re going to be offered.
Sometimes a really quick fix to get your score to go higher is to pay down the balances on your credit cards or to pay off a line of credit. Your loan officer can help you analyze your credit and find if there’s any potential to raise your score.