If you’re considering refinancing your mortgage, you are likely eager to find the lowest possible mortgage refinance rates. But before you start shopping around for the lowest rates, experts say you should establish your objectives, figure out the best loan product to meet your financial goals and prepare your finances to improve your chances of qualifying for the lowest interest rate. Here are 5 ways that will help lock in the lowest refinance rate possible.
Shop and Compare Multiple Lenders
Just like you wouldn’t go out and buy the first house you tour, don’t go for the first lender and mortgage rate you find. Look around and get rates from different lenders because you never know what others have to offer if you don’t do your research. Online marketplace Credible is a great resource when it comes to comparing multiple lenders to ensure you’ll meet your financial goals. Find out how much you could save by refinancing now.
Make Sure You Have the Best Credit Score Possible Before Applying
Correcting any errors made to your credit report, paying down a large credit card balance with a lump sum can “provide a quick boost” by reducing your debt-to-available credit ratio. Start paying your bills on time, so being consistent in this area is critical. Other factors to calculate your credit score include the amount owed, length of credit history, new credit and types of credit used. Avoid using over 30 percent of your available credit on a credit card and don’t close the old accounts that you paid off because it lowers your amount of overall available credit.
Lock in the Rate You Desire When You Find out — Not When You’re Ready
Don’t chance losing a low mortgage refinance interest rate during these unpredictable times. Lock it in soon as you can, because the rate and payment lenders are offering is subject to change until then. Using Credible’s free online tools, you can find out which rates you qualify for within just minutes (without any impact on your credit score). This means after you’re approved for the loan go ahead and accept the offer so the rate won’t change. A rate lock typically lasts about 30 days. This helps ensure your rate will remain the same from the time they give you an offer and the time it takes the loan to close.
Pay Attention to Your Loan-To-Value Ratio
You will get the best rates with a 40 percent home equity position (60 percent loan-to-value). Plus you will still get great rates with loan-to-value ratios of 95 percent or under, but the more equity in your home the better. Sometimes it may make sense to pay the loan balance down a bit if it will improve the rate. After all, the eventual goal is to pay these things off.
Change the Mortgage Terms
This means you may want to do away with the traditional 30-year fixed mortgage. One way to get a better rate is to consider a 15-year or 20-year fixed rate. 15-year fixed interest rates are in the mid to high 2s right now. You pay way less interest compared to a 30-year fixed. Not to mention a shorter loan term will help you pay off your existing mortgage much faster.
While shopping around for a refinance may take a little longer than refinancing with your current lender, the rewards can last as long as your loan. We simplify the process of refinancing your mortgage by starting with our related searches to get the lowest mortgage refinance rate.