2. Have a long and consistent work history
On top of a good credit score, mortgage lenders also want to see a consistent and long-tenured work history. If you've been working at the same place for many years and have consistent or growing annual income, lenders will be more likely to give you a home loan with an attractive rate.
Conversely, if you've changed jobs multiple times recently, lenders may be more leery of giving you a big loan because your income isn't as reliable. A loan officer will verify your employment status before you make an offer on a home and before the closing date of a home purchase. If you've changed jobs or quit during the closing process, it could jeopardize your ability to get a home loan.
3. Shop around for the best rate
One of the smartest moves you can make: Rate shop for the best mortgage. It's pretty easy to compare mortgage costs online. Take some time to compare online banks against national banks and local credit unions. The lower the rate, the lower the monthly mortgage payment will be.
Credit unions are an especially good place to shop around. This is because they tend to have lower fees than traditional banks -- and they pass some of these savings on to their members. Credit unions may also be more willing to work with consumers who have less-than-stellar credit profiles.
4. Ask your bank or credit union for a better rate
How's this for groundbreaking advice: Ask your bank to lower your rate. The worst-case scenario? They say no. If you are a good customer with an existing mortgage, it makes sense for your mortgage lender to do whatever they can to keep your business.
If you have an exceptional credit score, ask your lender to match a competitor's interest rate. You can also request a lower interest rate based on your exceptional credit history. Lenders want the business of people with excellent credit scores. They'll sometimes go to bat (so to speak) to get the business of high-credit borrowers.
5. Put more money down
Fifth, take into consideration how much money you plan to put down on your home purchase. Home loans in excess of $548,250 in most places in the country are classified as jumbo loans, and are perceived to carry more risk for the bank. These usually carry a higher interest rate, too.
Consumers may benefit by putting enough money down to lower a home loan out of the jumbo loan category. This strategy could save you thousands of dollars over the life of your loan.
Be careful, though: Very small home loans also have high interest rates. Try to keep your loan amount above $100,000 to hit the sweet spot of mortgage interest rates.
6. Shorten your loan
Financial institutions like it when home buyers repay loans quickly. Try taking out a 10-year or 15-year mortgage for a lower mortgage rate. In fact, any loan with a term shorter than 30 years should lower the interest rate you'll pay. A lower interest rate means your loan balance drops faster and home equity begins to build.
7. Consider the adjustable-rate vs. fixed-rate loan trade-off
Another consideration home buyers can make to lower their mortgage interest rate is adjustable-rate vs. fixed-rate mortgages. Adjustable-rate mortgages typically offer a lower rate for the first five or seven years. If you have the ability to pay off your home loan very quickly, an adjustable-rate mortgage may be worth considering.
Be careful, though. Adjustable-rate mortgages can adjust higher once this time frame has ended. For consumers who are unprepared, or in instances where a large shift has occurred in interest rates over a five- or seven-year time frame, home buyers could see a major increase in their monthly mortgage payments.
On the other hand, fixed-rate mortgages leave nothing to chance. You know what you're getting up front. This trade-off is something homeowners should consider.
8. Pay for points
Mortgage points are an upfront fee paid by home buyers to lower their mortgage rates. Each mortgage point is equal to 1% of the value of the loan, and paying a point typically lowers your ongoing interest rate by 0.125%. For instance, paying a point on a $250,000 loan would cost an extra $2,500, but it would reduce your interest rate by 0.125% over the life of the loan.
Points can save you money if you're going to remain in your home for a long time. Reducing your mortgage rate will save money over a 15- or 30-year time frame.
9. Set up automatic mortgage payments
Sometimes, the simplest things can save you money. Some lenders offer a lower interest rate for customers who set up an automatic mortgage payment. Just keep in mind that, if you close your account or change banks, your original lending bank could remove the interest rate discount applied for setting up an automatic mortgage payment.
10. Refinance
Finally, current homeowners looking for a lower monthly mortgage payment should strongly consider refinancing their existing mortgage.
Homeowners looking to refinance should follow all of the aforementioned suggestions -- especially shopping around for the best refinance rates. Use a mortgage calculator to decide whether refinancing, including refinancing fees, is really worthwhile.
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