In a rising mortgage rate environment, it is more important now to ensure that your clients can obtain the lowest rate available than ever before. Not only do lower mortgage rates help reduce your client’s mortgage payments, they can also increase their purchase power. Obtaining the best mortgage rate in today’s market is not as difficult as it may be perceived; just follow these five tips:
Tip 1: Know Your Client’s Credit Rating
Have your clients consult with a mortgage broker or correspondent lender about having their credit pulled and analyzed. The company they work with should have the tools and resources necessary to help them analyze your client’s credit report to see if there is room for improvement. Some companies can even complete a credit rescore to help your client improve their credit, which can help them qualify for lower mortgage rates. For example: paying down any revolving debt to 33 percent of their credit limits can help increase scores immediately.
Tip 2: Find a Good Mortgage Broker/Correspondent Lender
Most mortgage brokers or correspondent lenders offer much lower mortgage rates and lower fees than any other company, and they specialize in mortgage lending, unlike most big banks that focus mainly on deposits and other financial products not related to residential and commercial lending. They have the ability to shop your loan with the nation’s top lenders at the same time. Working with either of these professionals can eliminate the need for your client to shop for a mortgage, as this can be a very complicated, extensive and time-consuming process.
Tip 3: Increase Your Down Payment
Lenders will have adjustments to loan pricing if your clients put less than 20 percent down. The bigger the down payment your clients can afford the less risk the loan appears to be for a lender. If you can put down a 20 percent down payment or higher, you can avoid risk-based pricing adjustments from the lender and obtain a lower rate.
Tip 4: Get a Lower Term
The standard mortgage term is a 30-year amortization, but many lenders offer much lower rates with a lower term mortgage such as a 10- or 15-year fixed. Although the monthly payment is higher on a lower term mortgage, the interest rate is considerably lower and the amount of interest paid overall is substantially lower as well.
Tip 5: Pay Discount Points
Discount points are a percentage of your client’s loan amount that they may pay in order to receive a lower rate. Paying discount points may also be tax deductible, and in some cases, paying a 1 percent discount point can lower your rate by 0.25 percent to 0.5 percent.
Reno Manuele is with Neighborhood Loans
Neighborhood Loans is an Illinois and California residential mortgage licensee. Neighborhood Loans is an equal housing lender. License mb.6759826 nmls#222982.