Getting a low interest rate on a home loan will save you money over the life of the loan. Here are three things home buyers should know in order to achieve this.
Getting the Best Mortgage Rate - 3 Things a Home Buyer Should Know
As a home buyer, it only makes sense to try and obtain the lowest interest rate when applying for a mortgage. After all, that rate is a primary component of the mortgage payment, so it has a direct bearing on the amount of money you'll pay each month.
But how do you get a low rate when applying for a home loan? This is the question many home buyers want to know. So in this article, I will explain three important concepts you should consider when looking for the best rates of mortgage loans.
Concept #1 - Your Credit Score Plays a Role
The first thing to realize is that the interest rate you are offered will be partly determined by your credit score and financial history. In other words, the best mortgage terms are usually reserved for those home buyers with the best credit scores.
What does this mean to you when buying a home and applying for a loan? It means that your credit score will often dictate the type of interest rates you are offered. So if you have a bad credit history, and your score illustrates this to the lender, then there's little chance you'll be getting the best interest rate. If this is the case, you should focus on improving your credit score before you go shopping for a mortgage online.
Concept #2 - The Mortgage Type Makes a Difference
The type of home loan you select also plays a role in determining the interest rate you receive. So it's important for home buyers to understand this concept as well. For example, an adjustable rate mortgage (ARM) loan will generally come with a lower interest rate than a fixed-rate loan -- but that is only for the first few years. Of course, the rate on an ARM loan will also adjust at some predetermined point in the future, and typically this adjustment means a higher interest rate! That's another thing to keep in mind when mortgage shopping.
Concept #3 - You Must Compare Lenders on Key Factors
There is one last thing I want to touch on, and that is the need to shop around in order to get the most favorable rates from a lender. Shopping for a loan is just like shopping for anything else -- you have to compare multiple lenders in order to find one that offers the best rates and terms on the loan.
Brandon Cornett publishes a home loan website with hundreds of helpful tips and articles. Learn more about this subject by visiting http://www.homebuyinginstitute.com
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http://www.homebuyinginstitute.com/mortgage-types-23.php
http://www.homebuyinginstitute.com
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