How To Find The Cheapest Fixed Mortgage
Your offer has been accepted on your dream home and your thoughts go to how to find the cheapest fixed mortgage. Fixed rate mortgages are generally for a 15 year or 30 year term. This means that your principal monthly house payment will remain fixed, leaving concerns over fluctuating interest rates to those who took out adjustable rate mortgages. Plan ahead, since cleaning up your credit will ensure a better interest rate.
- Pay down your debts. Those season tickets on your credit card may have seemed like a good idea, but here you are a year later still paying for them. Financial advisor, Dave Ramsey, suggests the “Snowball method.” Pay the regular amount on all of your debts except the one with the lowest balance. Pay as much as you can on that debt monthly until it is paid in full. Take the money you were applying to that debt and “snowball” the next lowest balance with it. Continue with this method until all debts are paid. Although lenders do not expect you to be debt-free, they do require that your total debt obligation not exceed 36 percent of your gross income.
- Polish up your credit report. Like a desk drawer, your credit report can become cluttered with old or incorrect information. Annualcreditreport.com provides consumers with a free credit report annually from each of the three credit reporting agencies: TransUnion, Experian and Equifax. Look for discrepancies in your information and report anything that is incorrect to the credit reporting agency. Avoid closing out accounts that are inactive; this will lower your credit score. Resist the urge to check your credit beyond this report. It may affect your score, as well as your ability to get a loan.
- Do your research. Advertising teaser rates, lenders draw you in, but seldom give customers their advertised rate. Speaking with a loan officer and providing them with your information will give you a closer estimate of what your fixed mortgage rate would be. Be prepared to call several lenders and comparison shop. Do not be afraid to negotiate for a better rate.
- Look for hidden costs. Finding the cheapest fixed rate mortgage is not just about the advertised interest rate. Origination fees, points and closing costs will add to the overall amount you pay for your mortgage. Look at all of the costs associated with your loan before making a decision.
- Know when to lock in. The truth is that no one knows when to lock in an interest rate. Lock-ins can be for 30 days up to 120 days, but anything above 30 days will cost you. Some lenders charge a higher interest rate or a percentage of the loan for any lock-in beyond 30 days. Should your loan not close on time and you exceed your lock-in date, you may be subject to the current interest rate at that time. Some lenders will let you extend your lock-in, but it will cost you. Finding the cheapest fixed mortgage interest rate can be tricky, but it is not all a game of chance.