My Mortgage, Inc. Raleigh, NC - Chad Huffstetler, Regional VP of NC / Branch Manager NMLS: 114612

The best way to guarantee the lowest mortgage rate is to have a high credit score. As long as you have a score of 760 or higher, you generally can get the best rate available. Some of the largest mortgage lenders in the country are online-only and are aggressively looking for loan business by providing lower rates. Once you settle on a lender, make sure you lock in your rate and give yourself enough time to close the purchase by the time the rate lock expires.

A credit score is a snapshot of your credit history that can determine whether you qualify for the best interest rate—or any mortgage, for that matter. A credit score is a top-line analysis of your credit history, which includes how much debt you have, whether you make payments on time and any bankruptcies or collection actions you’ve had in your past. You’ll find out how much your credit score matters during the pre-approval process, as you might be disappointed that the rate you’re quoted is higher than the “teaser rate” you saw online. If you have a credit score of 680, for example, you likely won’t get the same rate as someone with a 780, which is considered among the best credit scores. That difference in interest rate—even if it’s a gap of just a quarter-point of interest—can add up over time.

Although a 20% down payment on your mortgage loan is a traditional goal for home buyers, you can put down a smaller amount, but you’ll probably be stuck with an extra payment each month as a result. Most conventional loans will allow for less than a 20% down payment but will charge mortgage insurance, which could be about 1% of the value of your loan. You can get the PMI removed from your monthly payment after you have 20% equity in your home, but it can take years to get there. The advantages of a 20% down payment don’t end with just avoiding PMI. It also allows you to lower your total monthly payment, which makes it easier to pay your mortgage down faster.

There are several mortgage types—from the conventional 30-year, fixed-rate loan to government-backed loans—and it’s important to find the one that’s best suited to your situation. Most buyers get a conventional loan with a fixed interest rate, typically for 15 or 30 years. There are some conventional loans that allow you to provide a low down payment—3% or less—but you’ll have to pay private mortgage insurance (PMI) if you put down less than 20%. Also consider government-backed loans, which can make it easier to purchase a home if you don’t have a high credit score and/or much for a down payment, including: VA loans. Veterans likely don’t have to provide a down payment or pay PMI. FHA loans. This type of loan is ideal if you have a low credit score and can’t make much of a down payment; you will have to pay FHA mortgage insurance. USDA loans. These are best if you have a low credit score and want to buy a home in a rural area.

When you start the process depends on how soon you’d like to buy a home. If you’re ready to buy a home now, then you’ll want to get pre-approved for a mortgage from at least one lender. It will give you an accurate picture of what you can afford and show a seller that you’re able to make the purchase. But if you’re months or weeks away from serious home shopping, first pull your credit report from all three credit reporting agencies—which is free through annualcreditreport.com—and make sure the information is correct. Also look up your credit score (available through many financial institutions) and see if it’s possible to improve it before applying. It is easier to get pre-qualification for a mortgage, but it doesn’t help you as much as a pre-approval. Pre-qualification is a quick determination by the lender that you should be able to qualify for a loan based on a discussion with the lender and a check of your credit score.