Mortgage rates have dropped to record-breaking lows amid the coronavirus pandemic, creating a massive opportunity for existing homeowners — especially ones who are struggling financially.
With a loan refinance, many homeowners stand to save hundreds per month (and tens of thousands in the long run) and lower their monthly mortgage payment by taking advantage of today's lower rates. Refinancing your mortgage can also lighten the load for those who have lost their jobs, had their hours cut, or just faced financial hardship since the pandemic emerged.
Are you considering saving money by refinancing your mortgage loan? Start by exploring your refinance options with a tool like Credible. You can compare rates and lenders with one click.
Follow the below tips to ensure you get the best mortgage and refinance rates possible.
4 ways to get the best refinance rates
Not everyone will qualify for the market’s lower rates, so you may need to put in some work to ensure you get the best deal. Here are four ways you can increase your chances of getting a bargain-basement rate (and save the most cash):
- Compare rates, closing costs and terms of several mortgage lenders
- Pay down your debts
- Improve your credit score
- Lower your DTI
1. Compare rates, closing costs and terms of several mortgage lenders
Rates, terms, and fees vary widely from one mortgage lender to the next, so comparing several options is critical. In fact, according to Freddie Mac, getting at least five quotes can save you a whopping $5,000 in the long run.
While contacting each lender individually is an option, using a rate-shopping tool like Credible can streamline this process and you can compare rates and multiple offers at once. It's 100% free — and doesn't impact your credit score, so you can determine if it's time to refinance with ease.
2. Pay down your debts
The less debt you’re dealing with, the more cash you have on hand to handle your mortgage payment, closing costs, and every other cost that comes with a refinance. It also means you’re less of a risk to the lender. And lower risk? That warrants lower rates.
3. Improve your credit score
The best mortgage loan rates are reserved for those with the best credit scores — think 760 and above. If saving money is your goal, you're going to want to make sure you fit the criteria.
If you're confident in your credit score, then plug in some of your information into Credible's free online tool to find out what kind of mortgage and refinance rates you qualify for.
If your credit score is on the cusp, consider taking the time to boost it before applying for your refinance. Follow these tips to raise your credit score and meet your financial goals:
- Pay off some debts
- Report any errors on your credit report
- Ask for a credit line increase (but don’t use it)
- Settle any overdue accounts
Be sure not to take out any new debts, either. This will only hurt your score — and your chances at a low mortgage refinance rate.
4. Lower your DTI
Your debt-to-income ratio — or how much of your monthly take-home pay your debts account for — plays a big role in your mortgage offers. It determines what loan products you’re eligible for, as well as what rates you get.
To improve your shot at getting a great refinance deal, make an effort to lower your DTI however possible. Paying down your debts is one way to do this, as is increasing your income. You might consider taking on a side gig, doing some freelancing, or even asking for a raise from your boss. The higher your income is, the lower that DTI will drop.
If you’re a homeowner, compare mortgage and refinance rates with Credible to see if you can save, but don’t forget about closing costs, which could neutralize any savings you gain from a lower monthly mortgage payment.
What are today’s mortgage rates?
Today’s mortgage rates are at historic lows, hovering under 3% since at least July. As of mid-October, the average rate on a 30-year, fixed-rate loan is just 2.625%, according to Freddie Mac.
Based on the current mortgage and refinance rates, it may be a good time for you to refinance. To see how much you could save on monthly payments today, crunch the numbers and compare loan rates and mortgage lenders using this free online tool.
The low rates stem from the Federal Reserve’s stimulus efforts, which are aimed at keeping money flowing into the U.S. housing market and the overall economy. The bank has announced it will keep the Federal funds rate low — near zero, actually, and that it will continue aggressively buying mortgage-backed securities for the foreseeable future.
Because of this, experts largely expect rates to stay low through at least 2021.
The bottom line: It’s a great time to refinance
If you're thinking now is the time to refinance, you're probably right.
Mortgage and refinance rates are so low that homeowners with just one-year-old loans can save big through refinancing. If you’re considering a mortgage refi, make sure to prep your finances, and always compare quotes from several lenders before moving forward.
To get started, head to Credible and get multiple mortgage offers with just one form.