Your home is likely one of the most expensive purchases that you’ll ever make. Generally, people don’t have the money to pay cash for their homes. Because of this, they will get a home loan that they’ll then repay over either 15 or 30 years. During this time, not only will you be paying back the money that you borrowed in order to buy your home, but you’ll also be paying interest on that money as well. And since you’ll be paying back this loan over a long period of time, the amount of money you’ll be paying in interest will likely be large as well.
Luckily, there are a few things you can do to reduce the amount of money you’re paying in interest when you buy your home. One way is to get a low interest rate so you’ll accrue less interest. To show you how this can be done, here are three ways to get the lowest interest rate on your home loan.
Improve Your Credit and Lower Your Debt
One thing that can have a big impact on what interest rates you’re offered from lenders is your credit. Because of this, you should do everything in your power to ensure that you have the highest possible credit score before you begin applying for home loans.
As a part of this, Eric Rosenberg, a contributor to Business Insider, shares that you’ll also want to work on reducing your debt-to-income ratio. What this means is that the more of your monthly take-home pay that you have allocated toward paying off current debts, the lower your credit score will be. So by paying off as much of your debt as you can, you should see a jump in your credit score, which will help you qualify for great interest rates on home loans.
Take The Time To Shop Around
Once you’re ready to start applying for a home loan, you should do your research to find the best home loan offer you can qualify for you.
When shopping around for a mortgage lender, Jennifer Bradley Franklin, a contributor to Bankrate.com, recommends that you not only look at banks and credit unions, but that you also consider online options and other, less traditional lenders. Only by seeing all your options will you know if you’re getting the best possible interest rate on your home loan.
Consider An Adjustable-Rate Mortgage
To get the lowest possible interest rate on your home loan, you might want to consider getting an adjustable-rate mortgage as opposed to a fixed rate mortgage.
According to Deborah Kearns, a contributor to NerdWallet.com, an ARM usually has a lower rate, at least at first. Because these rates can fluctuate, the rate could rise in the future. But if you’re really wanting to save in this area now, an ARM could be the way to do it.
If you’re going to be getting a home loan soon, consider using the tips mentioned above to ensure that you get the lowest interest rate possible.