When you decide to buy a home, one of the most important factors to consider is your interest rate. With poor credit, you can expect a higher interest rate, which can have a huge impact on your monthly payments. Ideally, you should understand some different ways to avoid higher rates on your mortgage.
Pay for a Lower Rate
A surefire option to reduce your interest rates is to pay for lower rates. If you have some extra money saved up, it might be worth it to pay for a lower rate, which can provide you with great savings on a monthly basis. For example, over the period of the loan, you could save thousands of dollars by paying for just a quarter of a percent off. When you buy the rate down, it is called paying "points."
Find a Co-Signer
If your credit score isn't that impressive and you know you want to apply for a mortgage soon, you should consider finding a co-signer, like a parent or sibling, with a better credit score to keep your interest rate down.
Put More Money Down
If you can save up enough money to exceed a 20% down payment, do it. Not only will this reduce the total amount that you owe, but it will give you a higher chance of landing a lower interest rate with your mortgage lender.
Plan in Advance
If you're still a year or two away from buying your first home, you can create and execute a plan to boost your credit score so you can be ready to put in a home loan application when the time comes.
So there you have it - four ways to keep your interest rate low. If you have some follow up questions about interest rates and mortgages, or you'd like some help with buying a home, feel free to contact us at any time!