Tips on Getting Best Interest Rates on Mortgages

Even though the Federal Reserve Board sets interest rates, there are things potential borrowers for home loans can do to obtain the best interest rate for a mortgage.

You as the best real estate agent in your geographic region can help your buying clients know what things can work to their advantage when they apply for a home mortgage.

Here are some tips:

1. Know the difference between a fixed or adjustable or variable rate mortgage (ARM).
   1. An ARM can be a better option than the more standard fixed rate mortgage if your buyer plans to pay off the mortgage loan within a short time frame of say three to five years.
   2. It can also be a better option if your buyer plans to move within a short time frame of three to five years.
   3. An introductory period for an ARM will have a lower interest rate than a standard, fixed rate mortgage.
   4. Make certain your client understands that the interest rates on an ARM will increase over time.
2. Encourage your buying clients to make the biggest down payment they can afford all the while making sure they have enough to pay for closing costs, moving expenses, emergency repairs, etc.
   1. Interest rates on mortgages are partially based on the home’s loan to value (LTV).
   2. A lender may “reward” your buying client with a lower rate if their down payment is significant because the lender will know your buyer is well able to afford the house and afford the monthly mortgage payment.
3. Your buying client’s credit score ought to be as close to excellent as possible. Buyers with higher credit scores demonstrate financial competency.
4. Suggest your buying clients pay for points.
   1. Essentially, paying for points translates into paying a larger amount of interest upfront.
   2. Every extra 1% of the loan payment amount your buyer is willing to pay may translate into as much as .5% off their interest rate.
5. Buyers with long employment histories and income stability reassure lenders that your buyers have the ability to make their monthly mortgage payments.
6. Encourage your buying clients to build up their cash reserves.
   1. The lower your buying client’s debt-to-income ratio, the lower your client’s interest rate will be’.
7. Encourage your buying clients to have enough savings on hand to cover 6 months worth of bills.
8. Encourage your buying clients to close on their loan as quickly as possible.
   1. If your client can close within an initial 30-day window, the lender may “pay” as much as .5% point less than a client who needs 60 days to close.