How to get the best mortgage rate when interest rates are rising

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Improve your credit score

When applying for a new line of credit with a With a lower credit rating, you’re more likely to get a higher interest rate, making it more expensive for you to borrow money. The same idea also applies when it comes to applying for mortgages.

Keep in mind that your credit score can give lenders clues as to how likely you are to repay the money you borrowed on time and in full. Because of this, lenders view those with lower credit scores as riskier borrowers and offer interest rates that are at the higher end of what the lender is offering.

Conversely, if you apply for a home loan with a higher credit rating, you will be viewed as a less risky borrower who is more likely to repay the loan amount on time and in full. Lenders then feel more comfortable offering a lower interest rate and it becomes cheaper for you to borrow the money.

Paying your bills on time is the most important thing you can do to improve your credit score. You should also try to keep your debt balance low and check your credit report regularly so you can dispute any inaccuracies that could affect your score – credit monitoring services like Experian and IdentityForce® can help with this.

Search for the best price in your area

Mortgage rates can vary by market and national rates can give a good rough estimate of where your interest rate might be. Keep in mind that the price you are likely to receive will depend more on factors such as your specific location, Credit Score and Credit Report. While you can take a look at any lender’s website to get an idea of ​​what interest rates they charge, the best way to get a solid idea of ​​what you’ll have to pay is to provide the necessary information and check your interest rate.

However, it is important that you submit your information and verify your interest rate with more than one lender so you have a better chance of getting the lowest possible interest rate. Don’t worry about your credit score being hit multiple times — when you apply for a mortgage, you can submit your information as many times as needed for a tough request within 45 days without your credit score suffering.

While you may not always get a drastically low interest rate between lenders, even a small difference can make a big difference in how much you owe in interest each month.

Consider a shorter loan term

15-year and 30-year terms are common for mortgage loans, meaning you have 15 and 30 years, respectively, to pay back the money you borrowed to buy your home. A 30-year loan typically gives you a longer time horizon for payments, along with smaller monthly payments. Note that shorter loan terms usually come with slightly lower interest rates since you’re agreeing to repay the loan over a shorter period of time.

Rocket Mortgage offers home loans with terms as short as eight years to as long as 29 years — this lender also offers Federal Housing Administration, or FHA, loans with down payments as low as 3.5%. Other lenders such as SoFi and PNC Bank offer terms ranging from 10 to 30 years. SoFi also offers a number of loan benefits — a $500 rebate for SoFi members and up to $9,500 in cash back when you buy a home through the SoFi Real Estate Center — that could potentially offset at least some of the interest you’re paying would pay even if you opted for a longer loan term.

rocket mortgage

  • Annual Percentage Rate (APR)

    Apply online for personalized rates

  • types of loans

    Conventional Loans, FHA Loans, VA Loans, and Jumbo Loans

  • conditions

    8 – 29 years, including terms of 15 and 30 years

  • credit needed

    Typically requires a credit score of 620, but will consider applicants with a credit score of 580 as long as other eligibility criteria are met

  • minimum deposit

    3.5% if proceeding with an FHA loan

advantages

  • May use the loan to purchase or refinance a single family home, second home, or investment property or condo
  • Can be pre-qualified in minutes
  • Rocket Mortgage App for easy access to your account

Disadvantages

  • Performs a tough request to provide a personalized interest rate, which means your credit score may suffer a little damage
  • Does not offer USDA loans, HELOCs, home loans or RV mortgages
  • Does not manage jumbo loan accounts after closing

SoFi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; Fixed rate and adjustable rate mortgages included

  • types of loans

    Conventional loans, jumbo loans, HELOCs

  • conditions

  • credit required

  • minimum deposit

advantages

  • Fast pre-qualification
  • Provides access to Mortgage Loan Officers for guidance
  • $500 discount for existing SoFi members
  • 0.25% interest deduction if you set a 30-year interest rate on a conventional loan
  • Offers up to $9,500 cashback when you buy a home through SoFi Real Estate Center

Disadvantages

  • Does not offer FHA, VA or USDA loans
  • Mortgage loans are not available in Hawaii, New Mexico, or New York

Choosing your term is an extremely important decision as there are pros and cons to going with a shorter term over a longer term. If you choose a shorter term, make sure that the higher monthly payments that will inevitably come with it fit into your budget.

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Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editors and has not been reviewed, approved, or otherwise endorsed by any third party.

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