For first time home buyers looking to enter the housing market during the past few years, finding a way to get the best mortgage rate has been an important task.  A quick search on the internet will reveal the current rates at major banks, but the mortgage rate a buyer receives is a little more individualized than what is shown online.  Here are some tips to help buyers get the best mortgage rate in our current market.

Shop Lenders

There are many different lenders out there and each may offer different lending programs.  To find the best loan for you, take some time to chat with several lenders and learn about the programs they offer.  In addition to conventional mortgage loans, VA ones, or FHA, buyers might consider a USDA loan if they meet the qualifications.  Speak with lenders to learn about how the length of a mortgage (for example: 15 versus 30 years) can alter your monthly payments or the amount of interest you will pay over the length of the loan.

Create a history of steady employment

Lenders want to know that buyers are capable of paying back borrowed money.  When you’ve only been in a job for a few months or have switched jobs frequently, this can be a concern for lenders.  Be prepared to offer up several years worth of tax statements and pay stubs to demonstrate that you are capable of carrying a mortgage.

For self-employed individuals (shoutout to my fellow 1099s), you will need to provide profit and loss statements along with tax returns.   If you have just started a job but are eager to purchase a home, talking with a lender is always a great first step to learn more about how your history of steady employment will affect your ability to get a mortgage.

Get your Credit Score

Different credit scores lead to different mortgage rates; in order to get the best mortgage for your home you need to have a high credit score.  Different loans have different credit score requirements, so while you may be able to get a loan with a score in the 500’s that loan will be more costly to you than a loan for someone with a higher score.

Your lender can help determine your credit score and then share ideas for things to do to improve it.  These things might include paying down high-interest credit cards, continuing to make timely payments, and not opening any other lines of credit.

Calculating credit scores can be a complicated feat and even things that would seem to improve your score, like paying off a line of credit and closing the account, can negatively impact the number; always talk to your lender before making any financial changes.

Grow Your Down Payment Fund

Another way to get the best mortgage rate for your home is to lower the overall amount of money you need to borrow.  Having a larger down payment on a house allows you to borrow less; putting twenty percent of the home’s price down is ideal.  With a twenty percent down payment, buyers avoid needing to pay private mortgage insurance.

Pay Mortgage Points

While this isn’t a strategy for everyone trying to get the best mortgage rate for a home, paying mortgage points at closing is a way to lower the interest rate on your loan.  More suited for buyers who are planning on staying in the home for the long term, buying mortgage points is like a prepayment of interest.  By paying some of the interest upfront, it allows the buyer to lower the offered interest rate.  Here is more about mortgage points.

Look for Programs that Assist First Time Home Buyers

There are programs out there designed to help first time home buyers with the purchase of a home.  These programs all have different qualifications based on income or location, so it’s never a bad idea to ask your lender about any available in your area.

Practice Patience and Pivot

First time home buyers can be disheartened to hear a lender say they don’t qualify for a loan or quality for an amount less than expected.  While this may not be the new you wanted to hear, it doesn’t mean you will never own a home.  Take the information given to by the lender and put it into practice-whether this is saving for a larger down payment, waiting another year to build some employment history, or considering a property in a different location, home ownership is still possible.  Being patient and implementing changes means that you’ll get the best mortgage rate for a home in time.