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31
Oct
Buying Tips

3 Tips On How To Lock In A Low Interest Rate

Robert J. Ott
October 31, 2022

Want to purchase a home, but concerned about the current high interest rates? Remember interest rates constantly change, but this doesn’t mean you have to take what you get. You can protect your finances and keep your payments affordable. Here are a few tips on how to mitigate your interest rate!

#1: Buy Down Interest Points
Did you know at closing you can actually buy down points from your final interest rate? That’s right, even if your credit score qualifies for a certain rate you can pay for better rate upfront before you lock it in. Different loan providers have different costs but as a general rule $1,000 will take off .01 point from your credit score. Saving a couple of grand upfront to put down on your credit score will be worth it in the long run. Who wants to pay more interest anyways?

#2 Improve Your Credit Score
Take a good look at your overall financial health. Do you have high revolving debt on a credit card? Maybe an outstanding delinquent balance from a missed payment? Have you been consistently making late payments? One of the most powerful moves you can make to improve your interest rate is by improving your credit score. We suggest consolidating any credit card debt you have into a personal loan; this is a sideways lateral move that can lower your monthly debt payments into a small monthly payment which will in turn help you increase your qualifying score on a mortgage loan. Your loan officer is looking for low monthly expenses, so when you consolidate make sure you're getting the lowest monthly payment possible, even if you plan to pay more each month. Consult your bank or a loan officer to prepare ahead of time. A few financial moves can put you in a great spot to buy a dream home.

#3 Increase Your Down Payment Amount
It’s simple, the less you finance the lower your rate will be. The less risk it is for the bank to loan you money the less your interest rate will be. If you have a few more months before you need to move or you can put off the excitement of purchasing a home just a bit to save more cash for a down payment, it can help immensely when you look at all the final numbers. 20% has been the standard for a down payment, but different loans have different requirements. Make sure you speak with your loan broker to choose the best loan that makes the most financial sense for your situation. Putting more money down will not only help lower your interest rate, but will also allow you to pay off your home earlier and see your equity sooner.

Bonus Tip: Get A Cosigner
Having a cosigner with more credit history than you can help you qualify for a better rate. It is understandable that not everyone has this option when purchasing a home, but it is worth the discussion. If you are struggling to get approved because you lack years of credit reports a cosigner gives you the credibility you need for the banks to approve a mortgage loan. (However, adding a cosigner to your mortgage loan does have some downsides i.e. not being able to benefit from a full homestead exemption if your cosigner already has a homestead exemption on another property, so this tip is may not work for everyone.)

We hope one or all of these tips will help you move forward in the purchase of your dream home! Need help finding a great team to guide you through this process? Visit us today at www.threepiecerealestate.com/buy for our complete buyers guide.

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