Low Interest Home Loan

Buying property of your own has long been considered a part of the “American Dream,” and with home costs considerably lower than they were ten years ago, buying a home can be more than just a good investment. It can also be extremely affordable – especially if you qualify for a low interest home loan.

With a low interest home loan, you will find that you are able to keep the price of your home low over time; even a single percentage point different in the interest rate of your mortgage can have a dramatic impact over time.

What can you do to be sure that you get a low interest mortgage when you are ready to buy a home of your own?

First, know your credit score. Your credit score is one of the first things that mortgage lenders look at when they assess what rate to charge a customer who applies for a home loan. The higher the number associated with your credit score, the lower the rate of interest will be – especially if your debt to income ratio is low. A FICO score above 750, for example, could mean a mortgage with an interest rate around 5.5%; a borrower with a score around 600 would be offered a home loan with an interest rate of greater than 8%. If you’re looking at homes that cost $300,000, this creates a base difference of nearly $10,000 that you could save with a better credit score.

Both your debt to income ratio and your credit score point to your credit-worthiness. If you have a lot of unsecured debt from medical bills or credit cards or even student loans, it’s important to consider paying them down – which can boost your credit score as well.

On the other hand, if you are interested in getting a low interest home loan without waiting to reduce your debt and improve your credit score, provided you have sound credit, there may be additional options available to you. Buying points is one of those options.

When you buy points, in effect you pay an upfront fee in order to reduce the amount of interest you will need to pay later. Be sure to talk with mortgage lenders who you are working with, and ask about all your options.

Also, you may have noticed the plural use of mortgage lenders – in order to secure a low interest home loan, it’s important to shop around and talk with a number of lenders. If you don’t want to speak directly with mortgage lenders in your area or you worry that you’ll feel uncomfortable talking about the fact that you’re working with multiple lenders to get the best interest rate for your mortgage, consider online services that allow you to request rate quotes from a variety of lenders. They’ll know they aren’t the only lender or broker competing for your business and may extend better offers as a result.

Getting the best rate on a low interest mortgage loan, in other words, is about two things. First, there’s your credit worthiness. Then there’s the willingness of the mortgage lenders to compete for your business. Take the time to research your options, and you will find yourself in a better position to keep the costs of buying a home low.