In today's economy, with still elevatedand significantly higher meant to combat it, many homebuyers have been priced out of the market. Similarly, current owners hoping to refinance may be holding off due to . Rates for a 30-year mortgage currently hover just under 7% while 15-year refinance loans aren't much lower, coming in around 6.6%.
While these rates are exponentially higher than what they were just a few years ago, they're still relatively low compared to the double-digit interest rates homebuyers of decades past encountered. And there are steps homeowners can take today to ensure that they've secured the best mortgage rate possible. Start by exploring your rate options here to see what you're eligible for.
How to get the best mortgage rate now
Here are four steps you can take now, in chronological order, to get the best mortgage rate possible.
Improve your credit
The lowest mortgage rates and best terms will be reserved for those with the cleanest credit histories and highest. So don't think about applying until you've done your due diligence and got your credit in top shape. This will take time but it will be worth it if you can secure a rate for even half a point lower than if you applied with a poor score.
Specifically, you'll want to check your credit report for any errors or inconsistencies and have them scrubbed as soon as possible. You'll also want to stop adding to your credit balance and do your best to reduce or eliminate it in full. And you'll be best served by not applying for any additional credit in the interim, as credit checks could ding your score and reduce your attractiveness as an applicant.
In short: Don't apply for a mortgage until you've improved your credit as much as possible. If you apply beforehand the lender will check your score, which can potentially drop it even further, leaving you with more work to do than if you had applied at a better time.
Shop for lenders
A home may be the biggest purchase you've made in your life to date - or ever will make again. Accordingly, you'll want to do your research before committing to any one bank or lending institution. Shop around and get rates and information from at least three lenders (the more the better). This will allow you to establish an accurate baseline to compare against so you know which bank is offering you a great deal and which bank may just look like they are.
When comparing and shopping for lenders make sure to complete an apples-to-apples comparison. So, don't look for a 15-year mortgage with one lender and a 30-year mortgage with another. Make your approach to each lender consistent and look for the same terms from each.
Lock in your rate
Once you find a rate that you're comfortable with, lock it in. Don't wait toon the home and get surprised with a higher rate. By locking in a rate, you'll avoid having it rise in between the time your offer was accepted and the time you get the keys to the front door. That said, a rate lock is exactly that - a rate lock. So be confident that rates aren't going to drop in the near term or you could wind up getting stuck with a rate that's higher than the current market at the time of closing.
Refinance your loan
Even if you successfully take all of the steps outlined above there's still no guarantee that you'll get a great rate, let alone one that's as low as it was in 2020 and 2021. But that doesn't mean you still can't get a great rate in the future. If the interest rate you get now is too high you could alwaysto a lower one in the future (once the market has changed). While this may not provide much comfort in the short term, it's still a viable and realistic back-up to keep in mind now.
The bottom line
The rate environment from a few years ago isn't likely to return anytime soon. But that doesn't mean that homebuyers or owners looking to refinance don't have ways to get a good mortgage rate now. First, look at improving your credit score and clean up your credit report. Don't be afraid to shop multiple lenders to find the best rates and terms. Once you do, be aggressive and lock in your interest rate before rates head upward again. Finally, if all of these steps don't get you a rate low enough, don't worry now — you can always refinance down to a lower rate in the future.
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