For the past year, mortgage interest rates for 30-year loans have averaged around 7%. The cost of financing a home purchase has been a challenge for some Northwestern Wisconsin home buyers. Fortunately, there are ways to put your mortgage application in the best possible light! Here are suggestions to help you.
1. Improve your credit score. Lenders price rates according to credit score tiers, and you might be just a few points away from getting a better rate! For example:
Borrowers with a FICO score of 740 and above will get the lowest interest rates.
Borrowers with a FICO score of 720-739 will get a rate that’s a little higher.
Rate pricing continues to adjust according to the borrower’s credit score. Borrowers with credit scores below 640 pay the highest rates.
See our prior blogs on credit scores for more information!
2. Try to qualify for Conventional financing. As a rule of thumb, Conventional mortgages offer lower rates than an FHA mortgage. VA mortgages, available to current or previous members of the U.S. Armed Forces, can be the best deal of all.
The rate difference between mortgage types is usually small, but over the life of the loan, the savings add up!
3. Make the largest down payment you can comfortably afford. The less you borrow, the less interest you’ll have to pay on the debt. Also, if you put 20% down, you can avoid mortgage insurance, which is an extra cost on your monthly payment. (Mortgage insurance protects the lender if you default on the loan.)
4. Apply with more than one lender. Compare the interest rate, loan costs and fees between mortgage lenders. Avoid multiple loan inquiries on your credit report by making the applications within the same week. Credit bureaus allow for “rate shopping” when inquiries are close to each other.
When you are ready to apply for a mortgage, let us know! We can refer you to local, reliable lenders who will explain all of your options. Six Lakes Realty is a locally owned family business with over 45 years of experience. Contact us today for friendly, hometown service!
John Flor
Managing Broker
Six Lakes Realty
Office: (715) 924-4806
Email: john@sixlakesrealty.com