As a home buyer and mortgage shopper, there are some things you can do to ensure that you are getting the lowest possible interest rate on your home loan. Here are three tips for getting the best mortgage rates in Washington State.
Getting the Best Mortgage Rate In Washington
Mortgage pricing is a highly individualized process. There are many different variables that can affect the rate you receive on a home loan in Washington. These include (but are not limited to) a person’s credit score, the type of home loan being used, the size of the down payments, and other factors.
Here are three things to consider in your quest for the best mortgage rates in Washington:
1. Consider paying points in exchange for a lower rate.
Paying points when you take out a home loan is one way to secure a lower mortgage rate. Under the right circumstances, this financing strategy could save the homeowner a significant amount of money over time. For that reason, it is best suited for a long-term stay of at least a few years.
A “point,” in this context, equals 1% of the principal amount being borrowed. In order to get the best possible mortgage rate, some Washington home buyers choose to pay points at closing to reduce their interest rate. It’s essentially a form of prepaid interest, as well as a trade-off. You are paying more money up front in exchange for a lower rate that could save you money over the long-term.
2. Do everything you can to maintain a good credit score.
There is a close relationship between credit scores and mortgage rates. Generally speaking, borrowers with higher scores tend to qualify for better rates, with all other things being equal.
Consumers actually have three primary credit scores, because there are three reporting agencies that maintain this kind of information. They are TransUnion, Equifax and Experian.
Banks and lenders use consumer credit scores as a risk-analysis tool. A higher number indicates a positive borrowing history, which is viewed as a lower risk to the lender. As a result, home buyers and homeowners in Washington with excellent credit scores are often able to qualify for the best mortgage rates.
But again, this is just one factor of many. Mortgage pricing takes several different factors into account. Credit scores are an important factor. But they are certainly not the only one. The type of home loan being used also plays a role here.
3. Choose the best type of mortgage loan for your situation.
In a previous tutorial, we covered some of the different types of mortgage loans available to borrowers in Washington State. Choosing the right kind of loan can also help you qualify for the best mortgage rate possible, given your credit situation and refinancing goals.
For example, adjustable (ARM) loans tend to start off with lower interest rates than their longer-term fixed-rate counterparts – at least initially. That’s why some homeowners prefer to start off with an ARM loan, with plans to either sell or refinance the home later on.