mortgage

Looking for lowest mortgage rates?

Homeowners hoping to refinance usually search for the lowest mortgage rates. The goal is to gain the greatest savings impact from a new mortgage loan.

Financial experts used to recommend homeowners refinance when interest rates dropped by 2 percent. However, today's homeowners often refinance to save just 1 point or less. A mortgage rate calculator can help make the decision about refinancing.

Even a small adjustment in mortgage rates can make a big difference in monthly payments. For example, a 30-year, fixed rate $400,000 mortgage at 4.3 percent costs $1,979 per month, while that same loan balance at 5.3 percent costs $2,221, or nearly $250 more per month.

In addition, borrowers save on interest payments over the long term by finding a loan with the lowest mortgage rates.

Mortgage loan options

The most popular loan option right now is a 30-year, fixed-rate mortgage. But borrowers who want to reap the benefits of low interest rates and pay off their loan faster may choose a 15-year fixed-rate mortgage.

Adjustable-rate mortgages typically have the lowest mortgage rates of all mortgage loans, with the rate adjusting after one, five or seven years depending on the loan. Borrowers generally prefer the certainty of a fixed-rate loan when mortgage rates are low.

Borrowers who know they will sell their home within the initial low interest-rate period of an ARM may want to opt for the lower monthly payments associated with ARMs.

Mortgage loan qualifications

Borrowers with the best credit score -- typically 740 or higher -- usually qualify for the lowest mortgage rates.

Lenders also look at the debt-to-income ratio of mortgage applicants. The lower monthly payments associated with low mortgage rates make it easier for borrowers to fit within acceptable debt-to-income ratios. Finding the lowest mortgage rates often allows borrowers to qualify for a larger loan.

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