Mortgage rates rose after the US Federal Reserve raised the prime rate by a quarter point in mid-March 2022. According to Bankrate’s latest survey of mortgage lenders, 30-year average mortgage rates for June 2022 are at 5.99%. The average rate over 15 years is 5.18%.
As rates climb towards 6%, potential buyers should be in a rush to find a home and secure a mortgage. Although house prices are still high, according to Redfin reports, with the market showing signs of cooling, this could presently be a great place for buyers to get low interest rates. How to quickly find the best mortgage offer?
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First, keep in mind the average of almost 6% for a 30-year fixed rate mortgage. Some lenders are already taking out loans with higher interest rates than this, while borrowers with excellent credit can still get lower rates. It’s important to shop around for the best possible rate right now, experts say.
“The rate has a big impact on your monthly affordability for as long as you keep that house,” Skylar Olsen, Tomo’s senior economist, told Time. She said rates could rise further “if inflation is not under control and Fed action needs to be more aggressive.”
That doesn’t mean you can’t find low rates, but it does mean that you may need to do some extra legwork to do so. Freddie Mac’s research reveals you can save $3,000 or more over the life of your loan simply by getting quotes from five lenders.
Don’t trust advertised rates when comparing lenders, advises The Mortgage Reports, because “online rates almost always represent the ideal borrower.” If your credit score isn’t perfect, your debt-to-equity ratio is high, or you’re looking to put less than 20% down, you’ll probably have to look a little further to find the cheapest lender for your situation. .
Luckily, you can find the best rates in three simple steps.
1. Clean up your credit
It takes time to pay off a debt or watch late payments disappear from your credit report. But you may be able to correct errors or misinformation on your credit reports to improve your credit score.
First, get copies of your credit reports from the three major bureaus: Experian, TransUnion and Equifax. Each individual is entitled to a free report from each bureau every 12 months by visiting AnnualCreditReport.com. Additionally, through December 2022, you can get a free credit report each week on the site, according to Customer Information from the Federal Trade Commission website.
If you find errors on the reports, send letters to the bureaus, as listed on the FTC’s website. If the errors are not corrected in time to process your mortgage, your chosen lender may request a rapid reassessment. Your lender will determine if an early reclassification is necessary and will also cover the fast reclassification fee, which can add up, according to The Mortgage Reports.
2. Get pre-approved
Once you’ve done everything in your power to boost your credit score, submit pre-approval applications to at least five lenders. Pre-approvals can cause hard pulls on your credit report, which means they will affect your credit score. However, by consolidating all your requests in a short period of time, this will count as one call and only reduce your score by a few points. Equifax said inquiries within 14 to 45 days can count as one request, but different scoring models use different time frames. For added security, it’s best if you can complete all pre-approval requests on the same day, or at least the same week.
Did you know that even if a lender offers you a mortgage rate, you can still negotiate better terms, including a lower interest rate? Mortgage reports suggested showing lenders competing offers to negotiate a better deal. For example, a lender might lower your origination fees to reduce closing costs.
You can also consider adding “points” to your mortgage, which allows you to “buy out” your interest rate. By paying 1% of your total mortgage at closing, you can reduce your interest rate by 0.25%. This can save you money over the life of your loan.
It can be tempting to accept your first mortgage offer or simply turn to your bank for a loan, but taking the time to shop around and compare your options can save you money for years.
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This article originally appeared on GOBankingRates.com: How to Get the Best Deal on a Mortgage as Rates Approach 6%