How to Reduce My Mortgage Rate
- 1). Know your credit history. Having an existing mortgage loan doesn't guarantee an instant approval when you apply for a mortgage refinance. Expect lenders to re-evaluate your credit history to see if you're eligible. Obtain your credit report and FICO score beforehand. Aim for a score in the 700's to qualify for the best interest rate. Pay your bills on time and reduce debt to help build a better score.
- 2). Bring out your financial documents. Along with your credit history, lenders will check your current financial standing. Loss of employment or a drop in income can prevent a mortgage refinance. Gather your paycheck stubs and your tax returns from the previous two-years.
- 3). Check mortgage rates with at least two different lenders. You aren't obligated to refinance with your current mortgage lender. However, your present lender may offer a better rate because you're a long-term customer. Request a rate quote from your current lender, and then speak with one or two additional lenders to compare rates and terms.
- 4). Reduce your mortgage rate with points. Negotiate a better rate with your mortgage lender by paying upfront fees at closing known as points. Each point paid equals one percent of your mortgage loan. For example, one point on a $200,000 loan equals an upfront fee of $2,000. Each point reduces the mortgage rate by .25 percent.
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