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You’ve spent years of your life working to build up your credit score and save up a down payment for your dream home. You’ve also put countless hours of research into the best places for you and your family to live, whether that’s a suburb somewhere in Oregon or in a thriving city in Washington. Perhaps you’ve even visited a few homes already and discussed options with your realtor. Now, the only thing standing in your way is figuring out an affordable mortgage.
One of the best things we do at Riverview Bank is help dreams come true, and one of the best ways to do that is by helping our clients secure the most competitive mortgage rates available in Oregon and Washington. In the following guide, we’ll discuss the most important factors to keep your rates low so that you can make your dreams come true:
Better Credit Means Better Rates
This one may seem obvious, but we’d be remiss if we didn’t discuss how important a good credit score is to securing a great mortgage rate. If you’re interested in taking out a mortgage for a home, you first will need to focus on improving your credit as much as you possibly can. How easy this is for you will depend on where you are starting from. Don’t worry, however, if you don’t have the best credit to begin with.
There are several ways you can boost your credit score leading up to taking out a mortgage on a house. Begin by paying down any debt that you have. Ideally, if you can, you should be paying more than the minimum on your credit cards, car payments, and other outstanding debts. Aim to avoid accumulating interest. Also, it’s especially important to make all your payments on time to prevent taking a hit to your score.
Bad credit isn’t the only concern; those with little or no credit at all should make an effort to build it up as much as possible before applying for a mortgage. At Riverview Bank, we offer secured credit cards for individuals with limited or poor credit so that you can work to improve your score before making a major purchase.
Make a Larger Down Payment
The larger your initial down payment, the lower your monthly mortgage rate and payments typically will be, so try to pay as much up front as possible on your new home. It may be worth delaying the purchase by a few months (or longer) to raise more capital toward your down payment. While it may be difficult to scrape that extra money together, that higher down payment will ultimately pay for itself in savings on your monthly mortgage and interest costs.
It’s worth getting creative to earn some extra money for your down payment. Whether this means temporarily getting a second job or borrowing cash from friends and family members, anything you can do to boost the amount you pay up front can go a long way toward improving your financial security down the road.
The Type of Loan Matters
While you could spend your entire life improving your credit score and trying to save a larger down payment, eventually, you’ll decide that it’s time to apply for a loan. When you do, remember that the type of loan matters a great deal when it comes to finding the best mortgage rates in Oregon and Washington. The options you choose will depend on your specific needs, including what type of home you are buying, how long you plan to live there, and how quickly you intend to pay the loan off.
Conventional Loans vs. Government-Backed Loans
Most home buyers will opt for a conventional loan, but there are other options, including VA, FHA, and USDA loans. The difference is in whether or not the loan is guaranteed by the government. VA, FHA, and USDA mortgages are all backed by government entities, while conventional loans are by private lenders, such as banks and credit unions.
Loans secured by the government often come with lower down payment requirements and lower interest rates, but they’re not available to everyone. While just about anyone can qualify for a conventional home loan with a sufficient credit history and down payment amount, government-backed loans have more restrictions. For instance, USDA loans are only available to buyers in eligible rural areas, and VA loans require the borrower to have past or current military ties.
Your lender can help you determine what you’re eligible for and whether a government-backed or conventional loan is the best option for you.
Fixed and Adjustable Mortgages
Another decision you’ll have to make is whether you opt for a fixed- or adjustable-rate mortgage. Fixed-rate mortgages, as the name suggests, offer a rate that won’t change. Once you’ve signed the paperwork, you’re locked in to that interest rate for the life of the loan. This can be beneficial due to its predictability, but it’s not necessarily the best way to negotiate the lowest mortgage rate.
Adjustable-rate mortgages (ARMs) typically start with lower rates and then, after a fixed time, change periodically based on the current market. This change won’t always be to the borrower’s benefit; rates can go down, but sometimes they increase, which means higher monthly payments and more compounded interest.
When choosing whether fixed or adjustable is the best type of loan for your situation, consider both the stability of your finances and how long you expect to live in the home you’ve chosen. For example, if you intend to live there for the foreseeable future, a fixed rate might be your best option because the interest rate will remain stable regardless of what happens with the market. However, if you expect to move in five years or sooner, adjustable rates can be preferable since you are likely to sell the home before your rates change for the first time.
Look Into Local Lending Options
One way to secure the best rate in your area is to work with local lenders. Local lenders tend to be more flexible than their larger, national competitors and provide more personalized attention to their clients. This means that they’re more likely to work with your particular situation—including lower credit scores—and they will be more familiar with local tax codes and other variables that affect mortgage rates
If you’re searching for a trusted local bank to discuss mortgage rates with, look no further than Riverview Bank, operating branches in both Washington and Oregon. There are many beautiful homes in the Pacific Northwest, and we want to help you buy one. As a regional bank, we also support the surrounding community by keeping the money invested locally. This means that choosing us for your mortgage needs is a win-win for everyone involved, so contact us today.