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Improve your credit score

When applying for any new line of credit with a lower credit score, you are likely to receive a higher interest rate, which will make it more expensive for you to borrow money. The same idea also rings true when it comes to applying for mortgages.

Remember that your credit score can provide lenders with clues about how likely you are to repay borrowed money on time and in full; That’s why lenders view people with lower credit scores as riskier borrowers and offer interest rates that are at the higher end of the lender’s range.

Conversely, when you apply for a home loan with a higher credit score, you will be seen as a less risky borrower who will likely pay the loan amount on time and in full. Lenders will be more comfortable offering a lower interest rate and it will be cheaper for you to borrow the money.

Paying your bills on time is the most important thing you can do to help raise your credit score. You should also try to keep your debt balance low and review your credit report regularly so you can dispute any possible inaccuracies that could be lowering your score: credit monitoring services like experience Y IdentityForce® can help with this.

Find the best rate in your area

Mortgage interest rates can fluctuate depending on the market, and national rates can provide a good ballpark estimate of where your rate might be. Please note that the rate you are likely to receive will depend more on factors such as your specific location, credit score and credit report. While you can take a look at each lender’s website to get an idea of ​​the 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 verify your rate with more than one lender so you have a better chance of getting the lowest rate possible. Don’t worry about your credit score taking a hit multiple times – when you apply for a mortgage, you can submit your information for in-depth review as often as you need within a 45-day period without your credit score taking a hit.

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

Consider a shorter loan term

Terms of 15 and 30 years are common for mortgage loans, meaning you would have 15 and 30 years, respectively, to pay back the money you borrowed to buy your home. A 30-year loan generally gives you a longer time horizon to make payments, along with smaller monthly payments. Keep in mind that shorter loan terms generally carry slightly lower interest rates, since you agree to pay off the loan over a shorter period of time.

rocketmortgage offers mortgage loans with terms of as little as eight years and up to 29 years; This lender also offers Federal Housing Administration, or FHA, loans with down payments as low as 3.5%. Other lenders, like sofi Y PNC BankWe offer terms between 10 years and 30 years. SoFi also offers a number of lending benefits: a $500 discount for SoFi members and up to $9,500 in cash when you buy a home through the SoFi Real Estate Center, which could offset at least some of the interest you’d pay even if decide to go with a longer loan term.

rocket mortgage

  • Annual Percentage Rate (APR)

    Request personalized rates online

  • types of loans

    Conventional Loans, FHA Loans, VA Loans, and Jumbo Loans

  • Terms

    From 8 to 29 years, including terms of 15 and 30 years

  • credit needed

    Typically requires a 620 credit score, but will consider applicants with a 580 credit score as long as other eligibility criteria are met

  • Minimum initial payment

    3.5% if you go ahead with an FHA loan

advantages

  • You can use the loan to buy or refinance a single-family home, second home, investment property, or condominium
  • You can be prequalified in minutes
  • Rocket Mortgage app for easy access to your account

cons

  • Runs a comprehensive query to provide a personalized interest rate, which means your credit score may take a little hit
  • Does not offer USDA loans, HELOCs, construction loans, or mobile home mortgages.
  • Does not manage accounts for jumbo loans after closing

sofi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; Fixed and variable rate mortgages included

  • types of loans

    Conventional loans, jumbo loans, HELOC

  • Terms

  • credit needed

  • Minimum initial payment

advantages

  • Fast Prequalification
  • Provides access to mortgage loan officers for guidance.
  • $500 discount for existing SoFi members
  • 0.25% interest rate deduction when you lock in a 30-year rate on a conventional loan
  • Offers up to $9,500 cash back if you buy a home through the SoFi Real Estate Center

cons

  • Does not offer FHA, VA, or USDA loans
  • Home loans are not available in Hawaii, New Mexico or New York

Choosing your term is an extremely important decision, as there are pros and cons to choosing a shorter term over a longer term. If you end up opting for a shorter term, make sure the larger monthly payments that will inevitably come with it fit your budget.

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Editorial note: Any opinions, analyses, reviews, or recommendations expressed in this article are solely those of Select’s editorial staff and have not been reviewed, approved, or otherwise endorsed by any third party.

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