How to Qualify for the Lowest Home Loan Rates

Get better home loan rates for mortgages or home-equity loans.

Jul 31, 2014 at 6:30PM

Credit: Lending Memo via Flickr.

When the time comes for you to buy a new home or take out a home equity loan, you'll want to be offered the lowest possible home loan rates. Here are some tips on securing low home loan rates.

First, you can get a sense of what the prevailing rates are for mortgages and home loans at websites such as The national average rate for a 30-year fixed-rate mortgage was recently 4.26%, and the average rate for a $30,000 home equity line of credit, or HELOC, was 4.54%. Note that the HELOC quote is based on your FICO score, which is a good reminder that our credit scores have a lot to do with the home loan rates we're offered.

At, you can even look up best home loan rates in specific regions and for different kinds of credit scores. For instance, let's see what rates are listed for a $165,000 30-year fixed-rate loan with 20% down and no points in Akron, Ohio. For someone with a FICO score of 740 or higher, Capital One Financial quotes 4.25%. With a score of 700 to 719, the bank's quote is 4.375%. If your score is much lower, between 660 and 679, the quote is 4.625%.

Better home loan rates via better credit scores

Clearly, having a solid credit score is key to obtaining low home loan rates. Even if your score is pretty good already, you might be able to increase it and thereby save money.

Before you plan to apply for your big loan, get a copy of your credit report (for free if possible) and have any errors fixed. If a collection agency is after you, you'd do well to clear that debt. Paying down credit card debt is useful, too, as lenders like to see that you're not anywhere close to maxing out your total credit limit (from all your cards combined).

More tips for getting better home loan rates

Here are a few other strategies to consider:

  • Shop around. Each lender is likely to view your credit a little differently and offer you a different rate. Ask about any special discounts available, too. Some banks, for example, might lower your rate if you bank with them and have your monthly payments automatically withdrawn from your account. Check rates at local credit unions, too, as they're often lower.
  • When you shop around, aim to visit different lenders on the same day or within a few days, as rates change daily -- and can even change significantly between morning and night.
  • Compare fees when you're shopping around, too. Make sure you're comparing apples to apples.
  • Consider putting more down on a home purchase. Lenders give better home loan rates to those who are borrowing 75% or less of a home's value, so even the standard 20%-down approach, which gives you a loan-to-value ratio of 80, isn't ideal.
  • Consider paying "points" if you can and it makes sense. A point is 1% of your loan amount, and by paying one or fewer points, you can lower the home loan rates you're offered. With mortgages, the longer you expect to stay in the home, the more sense this strategy makes.
  • Think about what kind of loan you really need and want, as that will influence the home loan rates you get. With mortgages, for example, you'll get lower rates for 15-year loans than for 30-year loans, and lower rates for adjustable-rate mortgages (ARMs) than for fixed-rate mortgages. ARMs typically feature a low introductory rate locked in for a few years, and if you're not planning to hold your mortgage too long, an ARM can be a smart choice. Meanwhile, home equity loans usually feature a fixed rate, while home equity lines of credit offer fluctuating rates.

We've been enjoying a long period of extremely low interest rates, but don't just settle for a seemingly good rate. A little legwork and research can get you even better home loan rates.

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Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool owns shares of Capital One Financial.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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