How To Get A Good Mortgage Deal

About Our Data Source For This Tool

The lenders in our data include a mix of large banks, regional banks, and credit unions. The data is updated semiweekly every Wednesday and Friday at 7 a.m. In the event of a holiday, data will be refreshed on the next available business day.

The data is provided by Informa Research Services, Inc., Calabasas, CA. www.informars.com. Informa collects the data directly from lenders and every effort is made to collect the most accurate data possible, but they cannot guarantee the datas accuracy.

The Financial Difference Between Two Mortgage Rates

Never settle on the first lender you get a quote from. According to research from the Consumer Financial Protection Bureau, interest rates between mortgage lenders can vary by 0.5% or more for similarly qualified borrowers. To secure the best rate, fees, and terms for your situation, most financial experts recommend comparing at least two to three different quotes.

Here is the difference in dollars between two different mortgage rates on a new purchase with a $300,000 home loan:

In this example, there is a 0.75% difference between Loan A and Loan B. Loan B costs $120 less per month and a total of $43,383 less in interest over the loans life.

Shop Around For The Best Rate In Your Area

Mortgage interest rates can fluctuate depending on the market and national rates can provide a good ballpark estimate as to where your rate might lie. Keep in mind that the rate you’re likely to receive will depend more heavily on factors such as your specific location, and . While you can take a look at each 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 rate.

That said, it’s important to submit your information and check your rate with more than one lender so you can have a better chance at securing the lowest rate possible. Don’t worry about your credit score getting dinged multiple times when you apply for a mortgage, you can submit your information for a hard inquiry as often as you need to within a 45-day window without your credit score suffering for it.

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

You May Like: What Questions To Ask A Mortgage Lender

Save Up For A Bigger Down Payment

When you make a small down payment on a home, the lender considers you a higher-risk borrower than someone who makes a larger down payment.

One place where youâll see lenders account for this risk is with private mortgage insurance . If you put down less than 20% on a conventional loan, youâll usually have to pay PMI premiums. Until you have enough equity to cancel it, PMI will affect you the same way a higher interest rate would: by increasing your monthly payment and your total borrowing costs.

Saving up for a bigger down payment can help you avoid PMI altogether. Even if you canât put 20% down, you can pay less for PMI with a larger down payment. On top of that, a larger down payment can actually get you a lower interest rate.

The more of your own money youâre willing to invest in the property, the less risky youâll be for the lender, and they may be able to offer you a lower interest rate.

Having trouble saving up? Check Down Payment Resource to see if youâre eligible for any down payment assistance programs in your area.

What if youâre refinancing? This strategy still works. You can bring cash to closing to increase your equity.

Buying Your First Home In 2022

Even under normal conditions, buying a house presents challenges of one sort or another for buyers. Buying a house in 2022 comes with a number of challenges.

One factor has been a dwindling supply of homes in some parts of the country. This stems from a combination of some sellers taking their home off the market and increased demand for homes in many areas. In some cases, sellers may have decided that this isnt a good time to move, or perhaps theyve encountered a financial situation that has led to this decision. Due to the pandemic, many families have decided to move out of congested urban areas and into suburban areas. In many cases, the lower supply and increased demand have resulted in higher prices and stiff competition.

You May Like: What Should My Mortgage Be

What Is The Average First

The size of mortgages nationwide is not tracked by whether the borrowers are first-time homebuyers. However, because FHA loans are so popular with first-time home buyers, the average size of an FHA loan is a good indication. For 2016, the average FHA loan was $190,000. Remember that housing prices and mortgages vary significantly throughout the country.

What Is A Mortgage Loan

A mortgage is a type of loan that is used to finance the purchase of a property. This might be a single-family home, a condo unit, a multi-family dwelling or an investment property. Mortgages are also used on the commercial side to purchase industrial buildings, office space or other types of commercial property.

A mortgage is a loan that is secured by property that is being purchased. In the event the borrower cant repay the mortgage, the lender can use the underlying property to try and recoup the remaining balance on the mortgage.

Buying a home is generally the largest purchase that most people make. Understanding mortgage loans is critical. Getting the right mortgage for your situation can significantly impact your overall financial situation and can help you make the home of your dreams an affordable reality.

Read Also: Can You Write Off Mortgage Payments

Shop Around For Your Lender

Rates and fees vary by mortgage lender, so getting multiple quotes is critical if you want the lowest costs. According to Phil Shoemaker, president of originations at Home Point Financial, working with a local mortgage broker may be your best option here.

They have their finger on the pulse of your respective market and can shop amongst many different lenders to find the best price, lender and loan product for you, says Shoemaker. Theyll also know about any state or city-specific assistance programs you might be eligible for, he says.

When shopping around, make sure to consider several types of lenders, including banks, online lenders and credit unionsespecially local ones. Many local institutions will offer perks and discounts if youre willing to move your checking or savings accounts there.

Make A Larger Down Payment

Simply put, the more money you put down towards your mortgage, the less you will owe on the loan. If you can make a larger down payment, you could have more equity in your home from the start. Not only will you need to repay less principal , you’ll also pay less interest over the life of the loan since it is calculated on the principal owed.

While some loans have low down payment options, the ability to pay more can reduce mortgage rates and monthly payments. The smaller the down payment, the riskier lenders view your loan, and the higher the interest rate you may have to pay.

Recommended Reading: What Is Mortgage Payment On 350 000

Can I Get A Mortgage With Bad Credit

• Poor: 579 or less
• Very good: 740 to 799
• Exceptional: 800 or more

To qualify for a conventional loan one thats not backed by any government agency youll usually need a fair credit score of at least 620. But its possible to qualify for FHA loans, which are insured by the Federal Housing Administration, with a poor credit score as low as 500.

And Veterans Administration loans, which are for veterans, active-duty service members and their spouses, have no minimum credit score requirements. USDA loans, which help very low-income Americans buy in certain rural areas, also have no minimum credit score requirements.

If youre trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at and your question might be answered by Credible in our Money Expert column.

As a Credible authority on mortgages and personal finance, Chris Jennings has covered topics that include mortgage loans, mortgage refinancing, and more. Hes been an editor and editorial assistant in the online personal finance space for four years. His work has been featured by MSN, AOL, Yahoo Finance, and more.

Find An Online Mortgage Brokers

If you prefer to sort out your finances over the internet, you can use an online mortgage broker such as Trussle , Habito or Mojo Mortgages instead. The face-to-face meeting is replaced with an online application form and once youve submitted your personal details youll receive a mortgage recommendation.

Both Trussle and Habito use computer algorithms to search through thousands of deals for you, while also providing a human adviser to talk through recommendations. Mojo uses a human adviser to search more than 10,000 rates.

Online brokers are quick and convenient. You apply for a mortgage at a time that suits you and you still get to speak to a real-life adviser once youve received your recommendation. You dont have to wait for paperwork to be posted and you can track your mortgage application online. But without an adviser to help you fill out the application, you could make a mistake which may go undetected for weeks and eventually lead to a rejection or delays.

You May Like: Can You Roll A Home Equity Loan Into A Mortgage

What Counts As A Cheap Mortgage

Between March 2020 and December last year, the Bank of Englands base rate was at a record low of 0.1%.

Back in 2021 there were a number of sub 1% mortgage deals on offer for those who had a large amount of equity in their homes. However, these deals began to vanish once the Bank of England started raising the base rate in December.

The rate of borrowing has increased seven times in a row since its record low of 0.1% to the current level of 2.25% with more increases expected throughout 2022. This has led to a rise in mortgage rates.

According to data company Moneyfacts:

• In October the average two-year fixed rate mortgage deal hit 5.50%. Thats up from December 2021 when the average new two-year fixed rate was priced at 2.34%
• The average new five-year fixed rate is 5.29%, up from 2.64% in December 2021

But while rates have gone up, they are still relatively cheap by historical standards.

These are the cheapest mortgage rates you can find at the moment:

However, the mortgage rates in the table above wont be available to everyone. To get an idea of the best deals available to you, try our free mortgage comparison tool.

How Much Can I Borrow For A Mortgage

How much you can borrow for a mortgage depends on the limits for the type of loan you’re getting, your lender’s limits, and your financial situation: your credit, your income, and the amount of cash you have available for a down payment.

For a conforming mortgage , a 20% down payment allows you to avoid paying mortgage insurance. On a $400,000 home, a 20% down payment would mean you need $80,000 up front. You can potentially get a conforming mortgage with a down payment as low as 3%.

Note that this calculation may be different if you qualify for a different type of mortgage like an FHA or VA loan, which require down payments of at least 3.5%, or if you’re looking for a “jumbo loan” over $647,200 in most parts of the US in 2022 .

You don’t have to go with the first bank to offer you a mortgage. Like anything else, different servicers offer different fees, closing costs, and products, so you’ll want to get a few estimates before deciding where to get your mortgage. Remember that a mortgage isn’t the only cost of owning a home you’ll want to budget for costs like maintenance and homeowners insurance, too.

Read Also: How To Find The Cheapest Mortgage Rates

Use A Traditional Mortgage Broker

A mortgage broker is qualified to give you advice on the best mortgage rates. Theyll get to know your circumstances and find out what your plans are for the future before recommending the best deal.

They operate independently from banks and building societies. But not all brokers search the entire mortgage market. Some only recommend mortgage deals from a limited selection of lenders. If youre using a broker, ask them how they operate before going ahead.

Mortgage brokers will have access to exclusive mortgage deals that you wouldnt be able to ask your bank for. There are also some lenders that only deal with mortgage brokers because they dont have any branches.

That said, from time-to-time mortgage lenders keep back their best mortgage deals and offer them to borrowers directly, so it is worth doing some shopping around via a price comparison site.

Using a broker could add an extra cost to your mortgage bill. All mortgage brokers receive a payment from the mortgage lender they recommend, but some also charge a fee for their services on top. This can be up to 1% of your mortgage balance but often it is a flat fee.

Mortgage Broker Fees And Commission

It’s normal for mortgage brokers to earn commission from lenders after arranging a mortgage.

Some will also charge you a fee, which will either be a flat rate or a percentage of the amount you want to borrow.

All mortgage brokers must clearly outline these charges and any fees or commission they receive from a lender prior to entering into a contract to act on your behalf.

Also Check: How Long Does It Take To Get A Mortgage Commitment

Gather Info On Your Income And Employment History

Lenders generally want to see two consecutive years of steady income and employment to ensure you can afford your mortgage payments and repay the loan over the long haul. If youre a salaried employee, lenders ask for W2 forms and federal tax returns for the past two years to verify your income. Lenders also check with your employer to verify how long youve worked there. If your earnings have gone down or youve had gaps in employment in the last two years, lenders are skeptical of your ability to afford a mortgage and you might have trouble getting a mortgage preapproval.

Similarly, self-employed borrowers have to jump through more hoops to get a mortgage. If you are self-employed, expect to pay higher interest rates than what you see online those rates are for borrowers who are considered more creditworthy because of their steady, verifiable incomes and excellent credit scores. Lenders also generally have stricter rules for verifying self-employment income. Not only will you need to provide federal tax returns for two years, youll also need to submit a signed statement from an accountant, a profit/loss sheet, and other documentation to show sufficient business income.

Make A Down Payment Of At Least 20% To Avoid Pmi

Some lenders and types of loans allow you to buy a home with a small down payment. But if you put less than 20% downon a property, youll need to buy private mortgage insurance.

Commonly referred to as PMI, private mortgage insurance protects your lender if you fail to make your mortgage payments. Typically, youll pay a monthly PMI premium as part of your regular mortgage payment until you qualify to drop the insurance.

PMI monthly premiums range between $30 to $70 for every $100,000 you borrow, according to Freddie Mac. So if you want to buy a $250,000 house, put 10% down and finance the rest , your monthly PMI payment would be at least $60, but could end up north of $140.

Because PMI represents an additional cost, saving up to make a 20% down payment can help you save money down the road.

Recommended Reading: How Long Is A Mortgage Application Good For

Check Your Credit Scores

Your credit score has more impact on getting a low-rate mortgage than any other factor. You can start by getting one free credit report from each major bureau Equifax, Experian and TransUnion at AnnualCreditReport.com.

Although you can also get your free credit score online through several sources, or pay for ongoing access to your credit reports and scores through platforms like myFICO, ultimately your lender will pull a mortgage credit report and use your middle score, or the second-highest score, to help determine your mortgage rate. Generally, a 740 credit score or higher may qualify you for the lowest mortgage rates available.

How To Improve Your Chances Of Getting A Mortgage Over 50

Getting a mortgage over 50 might be a bit more difficult compared to when you were younger, but there are plenty of deals out there.

To increase your chance of getting accepted you should:

• Be prepared to evidence that you can afford to pay off the loan, whether thats with your salary, your retirement income or both. Lenders may be concerned about you being able to afford the repayments into retirement so you need to show that you have a plan in place to repay the full mortgage.

• Review your spending. Lenders will look at your outgoings so its wise to check your spending habits and cut back where possible three to six months before applying.

• Know your credit score. Check your credit score and history, and if there are any issues or mistakes, resolve them before applying.

• Try to pay off any debts. If you have any other debts or loans, lenders will take these into consideration so try to pay them off or reduce them.

• Speak to a mortgage broker. An expert is best-placed to advise you on which lenders are most likely willing to accept you based on your circumstances.

Don’t Miss: How Do Banks Calculate Mortgage Payments