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A 30-year mortgage lets you become a homeowner for less money per month than you'd spend if you had a shorter term. You'll pay more in interest overall, but you'll also enjoy more financial flexibility, and if rates drop, you can refinance your home loan to pay even less every month.
Let's take a closer look at 30-year mortgage rates and see how this type of home loan works -- and learn how to save money on it.
Getting the best 30-year mortgage rate comes down to a few key moves.
Focus on making on-time payments (payment history makes up the biggest portion of your FICO® Score) and pay down existing debt if possible. Going into a home purchase with less high-interest debt (like that on credit cards) serves you in two ways.
Your credit utilization ratio (amount of debt relative to credit limits) will be lower, boosting your credit score ahead of buying a home. And you'll have fewer monthly payment obligations, freeing up more of your money for the large ongoing costs of owning a home.
Finally, pull copies of your credit reports for free from AnnualCreditReport.com. The reason is twofold:
You're not strictly required to put 20% down to buy a home, but the higher the down payment you can make, the better. You'll have less to finance (and pay interest on), and you might get a lower rate as a result.
Making a solid down payment shows a lender that you also have "skin in the game," and you'll be viewed as a less risky borrower.
While it may be tempting to go with the first mortgage lender you talk to, don't deprive yourself of the chance to save as much as possible on a 30-year mortgage.
Different lenders offer the same borrower different rates, as they all weigh risk differently -- plus they all charge different amounts for closing costs. Shop around and apply for pre-approval with several lenders.
You can get an idea of the 30-year mortgage rates different lenders offer by exploring their websites, but bear in mind that the rates shown will likely be those given to the most qualified buyers, which may not be you. Plus, rates shown could also include mortgage points, which will cost you more upfront in exchange for lowering your rate.
So you'll need to actually apply for pre-approval with multiple lenders to see what they can offer you. You'll need to provide:
When you apply for pre-approval, lenders will run a hard credit check, which will cause your credit score to go down by a few points. But if you make all your applications within two weeks, they'll count as one credit pull -- the credit-scoring process recognizes rate shopping before a big purchase like a home.
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You should also look at the annual percentage rate (APR) of any 30-year mortgage you're considering, as it includes more than just the interest rate. It'll reflect the interest rate, but also some of your upfront expenses like lender fees or mortgage points.
That is dependent on your situation. There's no way to know which way mortgage rates will be trending at any given time, but if you're satisfied with the rate you've been offered, it can be a good idea to lock it in so you can be assured of getting it. With a locked rate, any rate fluctuations while you're waiting to close on your loan won't affect you.
You'll likely be offered the chance to lock your rate after you've gotten a 30-year mortgage rate quote and made an accepted offer on a home. Depending on the lender, your rate lock could last 30 to 60 days -- the best way to find out how long you'll have is to ask. And you might need to pay a fee to extend your rate lock if mortgage closing is taking longer than expected.
Your 30-year mortgage rate has a direct impact on how much you pay every month -- a lower rate means a lower monthly payment. For example, if you buy a $350,000 home with 20% down, getting a rate of 6% for a 30-year loan will save you $144 per month over a 7% rate for the same purchase.
The difference in cost is more dramatic over the 30-year mortgage term. That difference of 1 percentage point in your rate means paying more than $50,000 more over your 360 payments. A mortgage calculator can help you see the real cost of borrowing.
A mortgage rate is what you pay to borrow money for a home purchase, and the number itself is the rate at which your loan accumulates interest on an annual basis. Borrowing $100,000 at a rate of 6% means you'll be paying $6,000 per year initially.
But your loan's APR is a clearer picture of what you're paying to become a homeowner. It includes that interest rate as well as lender fees and mortgage points (and potentially other upfront expenses).
If you want to uncover more about the best mortgage lenders for low rates and fees, our experts have created a shortlist of the top mortgage companies. Some of our experts have even used these lenders themselves to cut their costs.
A 30-year mortgage works by splitting your home purchase into 360 equal payments (12 payments a year times 30 years). Having such a long timeline can make it easier to afford to buy a home, and is the most popular way to become a homeowner.
Shopping around with multiple mortgage lenders is the best way to find a low 30-year mortgage rate. If you boost your credit score before applying and go in with a sizable down payment, you'll have an even better shot at saving money.
You'll pay more interest on a 30-year mortgage than you would with a shorter term (say, 15 years). But the benefits of splitting a home purchase over three decades include getting to pay less per month, which will likely make it easier to afford becoming a homeowner.
Ultimately, the choice is yours -- but a 30-year mortgage could be more likely to leave your budget with extra money you can save and invest for other goals.
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