Tips For Getting A Low Mortgage Interest Rate
Are you purchasing a new home? One goal you may have is to get the lowest possible interest rate on your mortgage. Thankfully, mortgage rates have been close to their historical lows, so the rate you lock in should be affordable. Current interest rates on a fixed rate 30 year mortgage are currently around 4%, with the June 2016 rate averaging at 3.9%. In comparison, the same loan had a 6% interest rate back in 2008. These tips will help you get a great interest rate.
Work with a Few Lenders
You should always shop around with a couple mortgage lenders when getting a home. The main reason is that you need a backup in case your loan falls through with one of your lenders. It is no fun to scramble with a new loan approval, and working with a few lenders at least gives you a head start in the process.
Working with a few FHA lenders will give you a chance to compare all the different interest rates being offered during the process, and gives you options for when it is finally time to lock in a rate.
Know Mortgage Trends
It will help to look at how the mortgage rates have been trending over several previous months to know where the rates could potentially head. While past performance is not a guaranteed indication of future interest rates, it can give you an indication if interest rates seem to be heading up or down.
Lock vs. Float
Your lender won't allow you to lock your interest rate until the loan is approved. You'll then have two options for locking your rate in.
A rate lock will secure the interest rate for a set period of time. The shorter the rate lock period, the lower the interest rate will be. It is common for lenders to offer locks anywhere between 1 and 3 months. A rate lock guarantees you that interest rate if you close within the time period, even if interest rates go up. It is common for a 30-day lock to not cost anything, but longer rate locks will result in an interest rate that is a little bit higher. Consider a longer rate lock when your home will take longer to close and you feel interest rates will increase.
You also have the option to float your interest rate, which means the rate is not locked until you decide to lock it. This is a good idea if interest rates are trending down and you feel they will be lower by the time you close on your home. However, if the interest rates increase then you'll need to lock in at a higher rate.
Work with a local mortgage lender for help with getting a great interest rate.