As mortgage rates tick upwards, 6 tips homebuyers should know to get the lowest rate on a mortgage now

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6 tips so you don’t overpay when buying a home.

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If you’re shopping for a new home, getting a low mortgage rate is likely high on your list, especially considering pros expect rates to keep rising (you can see the lowest rates you might qualify for here, But locking in the lowest mortgage rate on new loans can take a bit of finessing, experts say. So we asked experts to share the top things you can do to get the absolute lowest mortgage rate possible.

Compare rates from 3-5 lenders

Greg McBride, chief financial analyst at Bankrate. says you should compare three to five lenders to see who is offering the best interest rates. ,You can find the lenders with the best rates you might qualify for here.) And don’t neglect other factors besides the interest rate. “Consider the fees and any points, too,” says McBride. Closing costs are something to think about too: They typically run between 2% and 5% of the loan amount and include the appraisal fee, home inspection, application fee, prepaid interest, loan origination fee, insurance fee and more.

Weigh the pros and cons of buying points

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Discount points are fees borrowers pay to reduce the interest rate on their mortgages. This often means paying thousands of dollars up front, for a break-even point that’s years down the road. “The lowest rates quoted often come with mortgage points, a minimum loan amount requirement or a certain amount of equity,” says Danny Ceizyk, senior staff writer at LendingTree. This calculator can help you figure out if buying points might be worth it.

Raise your credit score

The higher your credit score, the better your rate typically. According to LendingTree data, borrowers who had credit scores of 760 or higher were offered an average APR that was 16 basis points lower than the average rate for borrowers with scores between 680 and 719. To raise a credit score, check your credit report for errors and correct them, pay bills on time and reduce the amount of debt you owe.

Apply for a shorter loan term

Shorter term loans, like a 15-year fixed loan, can offer better rates than longer term, 30-year loans. Ceizyk says, “Lenders price loans based on risk. If you can pay your loan off faster at a higher payment, lenders reward you with a lower payment because as your balance is paid down, there’s less risk you’ll default.”(Compare today’s mortgage rates for 30-year and 15-year loans here, “Keep in mind, however, that shorter loan terms usually mean higher monthly loan payments in return for less money spent in the long run,” says Channel.

Seek out first-time buyer programs

States like California, Florida, Illinois and New York, among others, offer first-time homebuyer programs to lure new residents to the area. From aid like down payment assistance, funds available for repairs and remodeling, no-interest second loans and sometimes reduced interest rates, these programs can help alleviate costs associated with taking out a new mortgage.

Don’t neglect the ARM (at least for some borrowers)

ARMs typically have lower initial interest rates than fixed-rate mortgages. But the rate and payment can change over the course of the loan, so homeowners with ARM loans may find themselves exposed to a lot of risk. But if you’re a person who knows they will move or pay off the loan soon, this can make sense for you.

Note: An earlier version of this story had “how to get the lowest rate when refinancing your mortgage” in the headline. It should have said “how to get the lowest rate when getting a mortgage.” It has been corrected.


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