Looking for a new mortgage rate? 4 things to keep in mind

Low mortgage rates can save you money and lower your monthly mortgage payment — but securing one is not as easy as it looks. (iStock)

Whether you’re buying a home or looking to refinance, getting the best mortgage rate should be one of your top goals. Not only does a low rate equate to a lower monthly payment, but it also reduces the long-term costs of taking out your loan.

Unfortunately, securing low mortgage and refinance rates is easier said than done — and if you want the best one possible, you’ll need to prepare long before you dive into the mortgage process.

Are you considering a home purchase or refinance this year? Follow these guidelines, and compare rates across mortgage lenders without impacting your credit score on Credible.

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1. Shop around with different mortgage lenders

Mortgage interest rates vary between mortgage lenders, so comparing your options is vital if you want the lowest rate. The average borrower can save $3,000 just by getting five quotes, according to Freddie Mac.

You’ll ideally want quotes from several types of lenders, including your current mortgage lender (if refinancing), an online mortgage company, a credit union and a traditional brick-and-mortar bank.

Getting a quote from your personal bank can be smart, too. Many financial institutions offer loyalty incentives for existing customers, so it could save you — either on closing costs or on your mortgage rate.

Comparing mortgage rates doesn't have to be time-consuming. Visit Credible to get prequalified and compare rates among multiple lenders in one marketplace.

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2. Prep your credit

Your credit — both your score and your entire credit report — can heavily influence mortgage interest rates. Lower credit scores and a worrisome credit report lead to higher (more expensive) rates, while higher credit scores and a strong credit profile can grant you the most competitive mortgage and refinance rates available.

Before you apply for your loan, pull your credit report and see where you stand. All three credit bureaus are offering free weekly credit reports through April 2022. Just go to AnnualCreditReport.com to pull yours.

If you see late credit card payments, collections attempts or any other issues that could give lenders pause, spend a few months getting your finances on track before applying. You should also pull your score, and if it’s on the lower end (think under 700), work to improve it. Generally, the best interest rates are reserved for borrowers with 740 scores or above.

Before you view home loan options from mortgage lenders, visit Credible to get your free credit score.

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3. Consider points

Points — also called mortgage points — allow you to pay a fee in exchange for low mortgage rates. One point costs 1% of your loan amount, and it usually lowers your interest rate by a fraction of a percent — often 0.25 or more.

The tradeoff here is that your closing costs will be higher, so you’ll want to be sure you’ll live in the home long enough to reap the benefit. 

To determine this, determine your breakeven point: The month in which your savings from the lower rate outweigh the costs of the points. If you plan to stay in your home that long, discount points could be a good move to consider. Use a mortgage calculator to find your breakeven point.

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4. Time your applications right

Last but not least, be careful about when you apply for your home loan. Since mortgage applications require a hard credit pull, they can send your credit score downward. To prevent multiple applications from dinging your credit several times over, you’ll want to file all of them within a very short window.

The exact period of time you have varies by credit scoring model, but it’s usually a few weeks to a month (sometimes slightly longer). During this time, several credit pulls will only count as one, thereby protecting your score — and your chances of getting that mortgage loan.

To learn more about current mortgage rates or the mortgage application process, connect with an experienced loan officer at Credible.

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How home buyers can be prepared

The best thing you can do to prepare for your mortgage loan is to be prepared. Get your credit in order, choose three to five lenders to apply with, research current mortgage rates and weigh the pros and cons of buying discount points. Finally, work with a good loan officer to ensure you’re timing your applications properly and following the best path forward for your purchase or refinance.

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