How To Determine Which Bank Offers The Lowest Mortage Rate

If you are one of the millions looking for the lowest mortgage rate then you’ll be pleased to know that mortgage rates are fairly low right now, for those with good credit. Lenders are having a hard time selling houses in today’s economy and as a result you can find the lowest mortgage interest rate in quite a while at some lenders. However, getting the mortgage rate that you want depends upon a few factors, not just your credit score. We’ll explore the kind of mortgages that you can choose and how to get the best interest rate for your home loan, with other factors besides your credit history.

The first thing that you can do to get the lowest mortgage rates is to have a large down payment. The average down payment for a first time home buyer is five percent, or about $5000 on a $100,000 home. The larger your down payment is, the more leverage you have with a mortgage company and the more you can demand a lower interest rate. Shop around at various lenders and find out what the interest rates are for a quarter of what you have to put down, then ask what it would change to if you put half of what you have saved and finally get the best rate by asking what the rate would change to if you put down the entire amount that you have saved.

Another thing that might affect your interest rate is your debt to income ratio, which indirectly affects your credit score. If you have a lot of debt that you pay on per month then you might have a hard time getting the best interest rate, or even a hard time getting approved for a mortgage. The debt to income ratio or DTI, should be around thirty five percent of your gross monthly pay. For instance, if you make $5000 a month and your monthly payments for your cars, credit cards and other loans only comes to about $1000 then you should be fine, because that is only about twenty percent of your gross income.

The type of loan that you choose can affect your interest rate as well. For instance, if you choose the  fixed rate mortgage and are looking for the lowest 30 year fixed mortgage rate then you may lock in a rate that will be low for the whole term of your loan. However, if you decide to go with an adjustable rate mortgage, then you might get the lowest 30 year mortgage rate in the future when your mortgage adjusts, depending on whether you choose a one year, five year or ten year ARM (adjustable rate mortgage).

Lenders make more money the longer that you pay on a loan, so the lowest 15 year mortgage rate may be higher than the mortgage rate for a thirty year mortgage. If you plan on getting a mortgage loan for thirty years then what you may want to do is ask what the mortgage lender would offer as far as interest rates go for a ten year mortgage and then a fifteen year mortgage, and finally find out if the rate will go down if you get a thirty year mortgage. Still, make sure that you have that large down payment in order to get the best rate available, and of course, make sure that your credit is up to par.