Getting a Low Mortgage Rate

How to Get a Good Interest Rate on a Home Mortgage 
Are you planning to buy a new house and want to save money along the way?

Then here are some ways to get a good interest on your home mortgage and minimize the amount of money you'll shell out throughout the payment period.

Tip #1: Keep Your Job or Get Promoted
You're in good shape if you've been gainfully employed for the past two years. If you got promoted during that span, that's even better. Your application may be disapproved if your employment record is spotty or you demonstrate declining earnings.

It's even more challenging when you're self-employed. You'll be asked to present your income tax returns over the past two years and may even be required to accomplish IRS Form 4506, which will let them verify whether your ITRs are the same ones in the IRS's records.

Tip #2: Save Up Enough to Cover the 20% Down Payment
When you qualify for a mortgage, you have the option to pay a down payment as low as 5%, but this tends to hike the interest rate and increase the amount of money you'll shell out in the long run. To get the best interest rate for your situation, opt for a 20% down payment.

The reasoning is that a 5% down payment loan is considered high-risk, and they'll cover that risk by raising the interest rate accordingly. On the other hand, a higher down payment indicates stable earnings and money in the bank, so they can afford to give you a lower interest rate.

Another tip is that they expect you to have enough cash reserves to cover your mortgage payments for the next 60 days. These cash reserves can be in the form of savings and checking accounts, certificates of deposit, or money market funds. It does not typically include retirement funds – unless you're willing to pay additional taxes and penalties.

Tip #3: Keep Your Credit Score Up
In most cases, a credit score of 620 is the minimum required to take out a home loan – and it will likely get you a higher interest rate. On the other hand, you'll get the best interest rates when your credit score is at 760 and up. How well do you score?

Study your credit score, correct any errors, and work on bringing it up over the next several months. With professional credit repair help, you could raise your credit score by over 100 points in months.

Tip #4: Check If You Qualify For Special Programs
Special programs qualify you for lower interest rates on your home mortgage or allow you a smaller down payment with no additional interest. If you or your spouse is a war veteran, you can qualify for a Veterans Affairs loan, which offers protection when you fall behind on your payments.

Other programs benefit first-time home buyers, such as the Federal Housing Administration and the U.S. Department of Housing and Urban Development. And if you plan to buy a house in a rural area, the U.S. Department of Agriculture mortgage program will help you.

Do Your Homework Ahead of Time
Ideally, it would be best to study your home mortgage options two years in advance, giving you enough time to get your finances and the best deal possible.

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