Controlling Your Mortgage Rate And The Current Market Rates

Buying a home is probably the biggest purchase most Americans will ever make. This has been especially true since the late 1990s, as home prices have increased well beyond the national inflation rate.
But a home purchase isn't something to be taken lightly. It's a large financial obligation, and if you aren't aware of the financing options available, it could wind up costing you far more than you'd expect.

Controlling your homeownership costs begins with your mortgage and the interest rate attached to that mortgage. The lower you can push your mortgage rate, the less money you'll pay over the life of the loan. With that being said, here are five ways you may be able to lower your mortgage rate.

1. Maintain a good credit score

• 35% is based on your payment history, so make your payments on time whenever possible. 
• 30% is based on your credit utilization, meaning you should do your best to keep your aggregate utilization under 20%.
• 15% is based on length of credit history, so avoid closing accounts you've had for a long time that are in good standing.
• 10% is based on new credit accounts, which means you should only open new accounts when it makes sense to do so.
• 10% is based on credit mix, which means lenders want to see that you can handle different types of loans, such as installment loans and revolving credit.
  

2. Have a long and consistent work history
On top of a good credit score, lenders also want to see a consistent and long-tenured work history. If you've been working at the same place for many years and have consistent or growing annual income, lenders will be more likely to give you a home loan with an attractive rate. Conversely, if you've changed jobs multiple times recently, lenders may be more leery of giving you a big loan because your income isn't as reliable. Banks and credit unions will verify your employment status before you make an offer on a home and before the closing date of a home purchase. If you've changed jobs or quit during the closing process, it could jeopardize your ability to get a home loan.

3. Put more money down
Take into consideration how much money you plan to put down on your home purchase. A small home loan, say $100,000 or less, means banks often charge a higher rate in order to make a decent profit. Likewise, home loans in excess of $417,000 are classified as "jumbo loans," and are perceived to carry more risk for the bank. These usually carry a higher interest rate, too.

Consumers may benefit by putting more money down on a higher-priced home purchase and landing in the sweet spot between these two figures. Putting enough money down to lower a home loan out of the jumbo loan category could save you thousands of dollars, if not more, over the life of your loan.

4. Set up automatic mortgage payments
Sometimes, the simplest things can save you money. While you'll want to check with your financial institution to see if this is offered, setting up an automatic mortgage payment that ensures you're never late can result in your bank offering a lower ongoing interest rate. Just keep in mind that, if you close your account or change banks, your original lending bank could remove the interest rate discount applied for setting up an automatic mortgage payment.

5. RefinanceFinally, current homeowners looking to lower their monthly mortgages should strongly consider refinancing their existing mortgages. Mortgage rates are still near historic lows, meaning homeowners paying 100 basis points or more over the current rates may benefit from refinancing.

Now that you know some tips to obtaining a low mortgage rate, let's talk about what the market looks like currently! With mortgage rates at three-month lows and within a quarter point of all time lows now is a great time to get a new loan. In January 2019, Freddie Mac reported the average 30-year rate was 4.45%. With the current rate around 3.6%, you can finance over $30,000 more, with about the same monthly payment. 

If you bought a home last year, here's how much you could potentially save by refinancing your current loan. The savings could be even greater, if you have mortgage insurance on your current loan. 

Finally, it's important to know that recently, mortgage rates dropped to the lowest level in three months. The very low rate environment has clearly had an impact on the housing market as both new construction and home sales have surged in response to the decline in rates, the rebound in the economy and improving financial market sentiment. 

If you are in the market for a new home or looking to refinance your current mortgage, contact The Roxburgh Group and we would be happy to help make your dreams a reality.