When shopping around for a new home, you must have a mortgage in order to buy the house (unless you have enough cash on hand to purchase the home on your own). There are many different locations you can obtain a mortgage from, and with these different locations there are also different mortgage rates. If you are looking for the cheapest mortgage possible there are several different options available to you, you just need to follow a few guidelines. These guidelines help ensure you are able to find a cheap mortgage for your new home.
To start, you must have a good credit score. The better your credit rating the lower your mortgage is going to be. This is because a bank sees you as a lower risk. The lower the risk you are the better your mortgage interest rate is going to be. However, if you have a low credit score, your mortgage interest rate is going to be higher, because banks see you as a higher risk to default on the loan.
Another method for lowering your interest rate is by selecting a smaller payment period. The interest rate on a five year loan is significantly lower than the mortgage rate on a 30 year loan. Yes, your overall monthly payment is higher with a five year loan, but if you are able to afford it you do receive a significantly smaller interest rate, which is going to save you thousands of dollars in the long run.
A third option for reducing your mortgage interest rate (you can use all of these methods at the same time to reduce the interest rate) is to put down at least 20 percent of the home cost. When you put down this amount your interest rate is reduced, often by at least half a percentage point. This saves you more money in the long run.