mortgage

How to get the best mortgage rate

 

 

Getting the best mortgage rate can be as tricky as finding a dirt-cheap air fare or the lowest price on a hotel room. You can score a really good deal, the kind you'll want to boast about to your friends and co-workers. It just takes a little work and know-how.

The first step is to sniff out the lowest rates available in your area.

You can do this by using the "Compare mortgage rates" feature at Bankrate.com.

Step two is convincing a lender that you're somebody who deserves a great rate.

You want to be able to argue that there's no chance of you becoming a deadbeat -- that you'll always make your mortgage payments.

So, use Bankrate's "How much house can you afford?" calculator to make sure you're going for a mortgage within your budget.

You also need to show you have a decent credit score. That's a three-digit number assigned by the big credit bureaus, based on your credit history. It's meant to let lenders know what kind of risk you are.

If your score isn't so hot, there are ways to raise it in a hurry, such as by paying down your credit cards.

Then, go through your files, your shoeboxes -- wherever you keep important paperwork. Pull together your tax returns from the last two years, your W-2s, a couple of recent pay stubs, your latest credit card and bank statements, and any divorce or child support documents.

A mortgage lender will want to see that paper trail to decide whether you really are worthy of a rock-bottom rate.

Insider tip

To land the lowest mortgage rate possible, it helps to make a down payment on the house of 20 percent or more. That means you may have to beg -- though not borrow. Or steal.

You can ask for contributions from family members or friends. Most lenders will have no problem with that kind of donated down payment, though you probably will have to present a gift letter stating that you don't have to repay the money.

Mortgage companies are picky when it comes to doling out their best rates. But the effort it takes to snag one can be worth it for years -- as long as you hang on to the loan.

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