When it comes to mortgages, there is a lot at stake. Especially for first-time homebuyers. Picking the wrong one can cost you thousands of dollars in interest payments, and negatively impact your financial future.
As home-buying technology has progressed, the process of finding the best mortgage rates can all be done online. These sort of calculators are a good way to familiarize yourself with the mortgage market in your area – the types, terms and rates available.
So what do you need to do to find and get the best mortgage rates in Omaha, NE?
Improve your FICO Credit Score to Get Best Mortgage Rates
Your three-digit credit score can be the difference between getting a low rate or being hit with more costly borrowing terms.
In general, the more confident the lender is in your ability to repay on time, the lower the interest rate they’ll offer.
To improve your score, pay your bills on time and pay down or eliminate those credit card balances. If you must carry a balance, make sure it’s no more than 20 percent to 30 percent of your available credit limit. Also, check your credit score regularly and look for any mistakes. If you find any errors, work to clean them up before applying for a mortgage.
Home Price and Mortgage Amount
The cost of the home and amount financed also affect mortgage rates. Here, mortgage loans fall primarily into one of three categories (Source: FreddieMac):
- Conforming: These are loans of $424,000 or less.
- Super Conforming: For those that live in certain expensive areas of the country, mortgage loans can go up to $636,150 for a single unit and still qualify as super-conforming.
- Jumbo: Mortgages that exceed the limits of Conforming and Super Conforming.
The key here is that, all other things being equal, a conforming loan will have a lower rate than a super conforming loan. And a super conforming loan will have a lower rate than a jumbo mortgage.
Bottom line: If you want the lowest possible mortgage interest rate, opt for a conforming loan if possible. If you live in a particularly expensive area, you may need to opt for a super conforming loan, instead.
Fixed vs. Variable Rate Mortgages
Whether the interest rate is fixed or variable affects the rate. All other things being equal, a variable rate mortgage will start with a lower rate than a fixed rate mortgage. Just remember that a variable rate mortgage will go up in a rising-rate environment. And if rates rise significantly, so could your payment.
Adjustable-rate mortgages can be another way to take advantage of low rates. Typically an option like a 5-1 ARM, where your rate is fixed for five years and then varies annually after that, will start out with a lower interest rate up front. But, again, in a rising-rate environment, your interest rate and payment will rise, too.
Save up for a down payment Will Help You Get Best Mortgage Rates
Putting more money down can help you obtain a lower mortgage rate, particularly if you have enough liquid cash to fund a 20 percent down payment. Of course, lenders accept lower down payments, but less than 20 percent usually means you’ll have to pay private mortgage insurance, which can range from .05 percent to 1 percent of the original loan amount annually.
The sooner you can pay down your mortgage to less than 80 percent of the total value of your home, the sooner you can get rid of mortgage insurance, reducing your monthly bill.
Loan Terms
Again, lenders will typically give you a lower interest rate when they mitigate their risks. So a shorter loan term will generally cut your interest rate–often significantly. You may pay much less interest on a 15-year note versus a 30-year mortgage, though you’ll get a higher payment in return.
Interest rate isn’t the only factor you should consider when deciding between a 15- and a 30-year mortgage. But it’s one important one.
Use the Mortgage Quotes to Negotiate
The lenders quote is not set in stone. Often times the loan officer increases fees and rates to increase their commissions. Use the mortgage quotes you get to negotiate the best mortgage rates. Take a quote from one lender to another lender asking them to beat it.
Then take that quote to another lender, and so on. Do this until you squeeze every last bit of savings you can. This is one of the most affective ways to make sure you’re getting the best mortgage rates available. You can not only get a lower rate, you can negotiate the closing costs and origination fees.
Graves Development Resources | Land Developer in Omaha, Nebraska
Graves Development Resources (GDR) has been designing and building the market’s finest neighborhoods since 2000, with over 5,000 home sites and important commercial development projects throughout Douglas and Sarpy Counties.
Our pages showcase current neighborhoods where new home buyers may select from hundreds of home sites. We are definitely “phone friendly” and welcome the opportunity to provide you all the information you need before making one of the most important decisions of your family’s future. Contact us for any questions.