How to get a better rate on your mortgage

When you buy a new home, you can reasonably expect that the cost of borrowing will add up to a great deal of money. Anything you can do to shave even tenths of a percent off the percentage rate can potentially save you thousands of dollars over the 30 years you’ll carry the mortgage.

There are a number of things you can do to help yourself get a better rate on your mortgage:

Check your credit score

To get an idea of what your credit score is, you can check with free services or at, which costs around $20. Looking at these reports can give you a general idea of what your score is and how to improve it. If you pull your own scores, make sure to compare them to what your lender is seeing.

Fix any errors on your credit report

Look through your credit report from each company for errors and negative items. Try to fix any errors that you find as quickly as possible. Each reporting agency will have details about disputing information. If the issue is not resolved after filing a complaint, contact the Consumer Financial Protection Bureau.

Pay your bills on time

From time to time, it’s easy to put off paying a bill on its due date. It really seems insignificant, especially if you’re having trouble making ends meet. Just one late payment, though, can cause your credit score to drop.

Reduce the amount of debt you owe

One of the criteria your mortgage lender looks at is your debt-to-income ratio, which is simply how much debt you are carrying compared with your monthly income. This number affects whether you qualify for a loan and what your interest rate will be.

Keep your old accounts open

Part of your credit score is based on the length of your credit history. It will not hurt to keep an old account open until your mortgage is secured. It may even be beneficial to keep your oldest account open even if your annual fee is due.

Don’t apply for any new credit

When you decide that you’re going to apply for a mortgage, don’t apply for new credit of any kind. Not only can it mess with your debt to income ratios, if you have few accounts or a short credit history, inquiries can have a greater impact on your credit score.

Make sure to discuss your credit scores – and how they affect your mortgage rates – with your lender. They may be able to make other suggestions about how to improve your credit score so that you may qualify for a lower rate, which could save you a lot of money in the long run.

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