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6 Easy Step to get the best mortgage Loan rate

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Since most people don’t have the kind of liquid cash available to buy a home, a mortgage — in which you borrow money from a lender and spend years paying it back, plus interest — is often a necessary part of the home-buying process.

The terms of your mortgage matter greatly, since the interest rate, type of mortgage and length of time you have to repay it can dramatically impact the total amount you spend. Lower your rate by a percentage point or two or pay the mortgage off a few years early, and you’ll save thousands in interest over the course of the loan.

It’s a good idea to set yourself up as best you can to ace the mortgage application and score the lowest rate.

“There are three pillars: your credit score, your income (which is converted to a debt-to-income ratio) and your assets,” explains Josh Moffitt, president of Silverton Mortgage in Atlanta.

In each of those areas, here are the steps to take to help get the best possible mortgage rate.

1. Improve your credit score

Your three-digit credit score can be the difference between getting a low rate or being hit with more costly borrowing terms.

“A credit score is always an important factor in determining risk,” says Valerie Saunders, executive director of the National Association of Mortgage Brokers (NAMB). “A lender is going to use the score as a benchmark in deciding a person’s ability to repay the debt. The higher the score, the higher the likelihood that the borrower will not default.”

In general, the more confident the lender is in your ability to repay on time, the lower the interest rate they’ll offer.

To improve your score, pay your bills on time and pay down or eliminate those credit card balances. If you must carry a balance, make sure it’s no more than 20 percent to 30 percent of your available credit limit. Also, check your credit score and report regularly and look for any mistakes on your report. If you find any errors, work to clean them up before applying for a mortgage.

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