Recs

0

How to Qualify for the Lowest Home Loan Rates


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 Bankrate.com. 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 Bankrate.com, 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 Some banks, for example, might lower your rate if you bank with them and have your monthly payments automatically withdrawn from your account.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.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3040667, ~/Articles/ArticleHandler.aspx, 12/19/2014 5:22:14 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Selena Maranjian
TMFSelena

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

Today's Market

updated 7 hours ago Sponsored by:
DOW 17,778.15 421.28 2.43%
S&P 500 2,061.23 48.34 2.40%
NASD 4,748.40 104.08 2.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes


Advertisement