Mortgage rates have fallen throughout 2019 and continue to hold steady at a very attractive rate. Not only is this exciting news for people shopping for a mortgage, the lower rates can also benefit those who already have one.
If you have considered refinancing your existing mortgage to obtain a better rate, now is a good time to move forward with that. Reducing your interest rate by even one-half of one percent could save you a significant amount of money over the life of your loan.
Before you start looking for a better mortgage, however, it’s important to position yourself to get the lowest possible interest rate. Below are some tips on how you can do that.
Obtain a Copy of Your Credit Report to Check for Accuracy
The Fair Credit Reporting Act allows consumers to receive a free copy of their credit report from each of the major credit reporting agencies once every 12 months. The names of these agencies are Equifax, Experian, and TransUnion.
When you want to get a better mortgage, making sure that your credit report is accurate is a good way to start. If you spot any inaccuracies, you should notify the appropriate credit reporting agency in writing.
Under the mandates of the Fair Credit Reporting Act, the agency must correct the error within 30 days or inform you in writing of why it cannot do so.
Try to Get Your Credit Score as High as Possible
You also need to pay attention to the three-digit score included with your credit report. This is your credit score, a figure that can make or break your attempt at refinancing.
Although each of the three credit reporting agencies does things a bit differently, credit scores typically range from 300 to 850. The higher the number, the greater the chance you have of obtaining a better mortgage through refinancing.
Credit reporting agencies use the following algorithms when assigning consumer credit scores:
- Timeliness of payments since credit reporting agencies begin reflecting late payments once you have gone 30 or more days past due.
- The total amount you owe between all accounts.
- How long you have maintained a credit history.
- The type of credit you carry such as revolving credit cards and installment loans.
- How many new accounts you have opened in the last year.
Lenders are especially interested in seeing how much of your available credit you actually use. A consumer who pays his or her bills on time but is using 95 percent of available credit is not a good risk.
That is because this consumer may be living on credit and likely won’t be able to keep up with timely payments much longer. From a lender’s perspective, a loan applicant should use less than 30 percent of the credit available to him or her.
Another thing you can do in addition to keeping your credit utilization low is pay off some accounts entirely. This is the fastest and easiest way to see a significant jump in your credit score.
Is Refinancing Right for You?
If you’re ready for a better mortgage, we at Mortgage Investors Group are here to help. Please contact us at 1-800-489-8910 to learn more about your refinance options.