​How Can You Get Better Mortgage Rates?

Unless you’ve got the capital to buy your rental properties outright, you’re probably working with a lender to fund your investment. This is all fine and dandy, of course, except that you wind up paying more. Even with low interest rates, you’re giving the bank THOUSANDS of dollars each year, and these are dollars that we know you’d much rather have in your own account. So what can you do? Well, for starters, you can try to snag yourself the best mortgage possible. Here’s how:

1. Do some comparison shopping. When you’re in the market for a new car, you don’t sign the papers on the first one you see, do you? Of course not, and you shouldn’t leap at the first mortgage rate you see, either. Spend some time researching what’s being offered by different lenders. You can ask your agent for a referral, or even your friends or other investors you trust. Or, you can get online and do your own searching to for both local and big-name lender rates.
2. Improve your credit score. Mortgage rates are tiered according to a variety of criteria, with your FICO credit score being one of the most important determinants. The lower your credit score, the higher your mortgage rate. If your score could stand to use a little improvement, you need to take the steps to make this happen. Start by requesting a copy of your credit report and looking it over for any errors. If there are any, correct them. Other actions to take include paying down or paying off debt, keeping balances low, paying debts on time, rectifying any unpaid late fees, and keeping new credit applications to a minimum.
3. Make a bigger down payment. The magic number for down payments is 20%, or that’s what’s recommended anyway. If you can swing a little bit more than that, great, but if not, make sure you’re at least putting down that 20%. Any lower than this, and you won’t be eligible for lower rates, plus you’ll end up paying PMI, so even more money will be trickling out of your pocket each month.
4. Consider different types of mortgages. Who says you have to do a 30-year conventional loan? Take a look at some of the other mortgage types and terms to see which one might work best for your situation. Aside from fixed rate mortgages, there are ARMs, 2-step mortgages, and balloon loans to name just a few. Some of these are considered risky by most people, but the risk/reward really depends on your unique circumstances.
5. Get a complete breakdown of the closing costs. There’s nothing worse than unexpected fees at the end of the process. Before settling with a lender, get a detailed report on all the fees associated with the loan, including points and origination fees. You may be able to save money by going with another lender who charges less in associated fees.