Home Loan Rates

    Finding the best home loan rates before you settle on a loan can save you thousands of dollars over the course of your mortgage. Even the slightest percentage difference can mean an extra several thousand dollars in your pocket. Mortgage rates today are also extremely low, making now one of the best times ever to apply for a home loan. The best home loan rates are given to those with the best criteria.

    The best home loan rates go to those people that lenders see as a safe investment. You will need to show proof of stable income (a few years tenure at your job helps as well), a FICO score of at least 760, and a solid down payment, ranging anywhere from 10-20%. Although, in many cases you may be required to put down 20%. Figure out how much you are looking to realistically spend on your home, and then begin working on saving up the largest down payment possible. Lenders have tightened their criteria since the housing crisis began, and only the top tier candidates will obtain the best home loan rates.

Obtain a High Credit Score

Your credit score is one of the most, if not the most, important part in obtaining the best home loan rate you can. People with a FICO score of 760 or above are the ones who obtain the best rates. Anything above 700 is considered very good, anything below that and you'll run into high interest rates and limited options for loans. You can check your credit score for free online at sites such as FreeCreditReport.com. Here are some of the Do's and Do not's of maintaining a high credit score.


- Make your payments on time. This one should be obvious. If you aren't current with payments, make sure you get current.

- Check for errors on credit reports. Sometimes errors are made and can be damaging if not caught.

- Keep your credit balance below 30% of your maximum limit. High outstanding debt will negatively impact your credit score.

Do not:

- Open a lot of accounts at once. Applying for a lot of credit accounts at once will hit your score with a lot of hard inquiries which will lower your score.

- Close old accounts. Closing old accounts reduces your average credit history length, which is a factor in determining your credit score.

Home equity loans

Short Term vs. Long Term Loans

    Another way to get the best home loan rate is to consider getting a shorter term loan than the traditional 30 years. There is a wide variety of interest rates and fees that lenders provide for shorter loans. Some websites have compiled a number of lenders with different home loan rates that let you compare different rates easily. Check out the home loan rates for 15, 20, and 25 year loans and see if it affects your interest rate at all. Some people report that there is not much of a decrease between 20, 25, and 30 year mortgages, but that they do see a decrease once they look into 15 year mortgages. The most obvious downside when going with a 15 year loan vs. a 30 year loan is that you will have a higher monthly payment. There are other pros and cons between going with a 15 year loan vs. a 30 year loan, so make sure you figure out which one is best for you. Typically, a 30 year mortgage will trump a 15 year mortgage, but that is not true for all cases and it is important you look at it carefully from your own situation. 

    Once you’ve tightened up your credit score, saved up a sizeable down payment and have your other finances in order, you can shop around for different interest rates. Getting around 3-4 different quotes is considered ideal, and the more you get the better. Don’t just go with the first loan rate you find at your local bank. By making sure your credit and finances are in check, and by looking at many different lenders, you will put yourself in a good position to obtain a home loan with a low interest rate.