Applying for a mortgage? Take these 3 smart steps first

It wasn’t that long ago that you could secure a new mortgage loan for under 3%, but any potential home buyer today knows Those days are gone. After an increase in federal interest rates, ongoing inflation and a series of other economic factors, Mortgage rates today The average is between 6% and 7% — potentially marking a new normal for home buyers

“We may look back to 2023 and realize that rates may not have been high, but normal,” says Sean Ballinger, CFP, founder of Columbus Street Financial Planning. “The last twenty years of what many would call artificially low interest rates is a bias that we may need to address. Mortgage rates of 6-7% on 30-year mortgages should be seen as normal and a signal of a strong economy.”

Mortgages can be more expensive across the board, but there are still steps you can take to ensure you qualify The best possible mortgage rates today. By taking a few smart financial steps before you apply, you may be able to save a significant amount over the life of your loan.

Learn more about the low mortgage rates you may qualify for right now here.

Make these smart steps before applying for a mortgage

These three smart steps can help you secure the best mortgage rates today.

Familiarize yourself with the interest rates and terms

Mortgage loans may not have the same low interest rates they did a few years ago, but you should still be familiar What is competitive? Before you apply. Mortgage rates today average around 6% to 7% APR, but even those averages can change.

If you opt for a 30-year mortgage, you may have lower monthly payments, as you’ll have more time to pay off the balance. However, long-term loans usually have the highest interest rates. On the other hand, a 15-year mortgage often carries a higher monthly payment but a slightly lower interest rate overall. For example, average mortgage rates as of July 6 Bankrate 6.40% for a 15-year mortgage but 6.95% for a 30-year mortgage.

Be sure to assess your financial situation and what you can afford before you apply so you know which type of mortgage makes the most sense for you.

Compare today’s best mortgage rates available to you now!

Work on your credit score

Your credit history and credit score is a major factor in determining whether a potential lender will approve you for a mortgage and what terms to offer.

Before you apply for a new loan, it’s always important to know Credit score And review your credit report (which you can access for free through all three credit bureaus) for any errors or discrepancies.

Because mortgages come with such large balances, and potentially affect your finances for decades, applying with the best possible credit score to lower your interest rate can save you thousands of dollars over the life of the loan.

If your score is Less than ideal, you may want to pause your application until you can improve it. Start by making sure you pay off any existing loans or lines of credit in full and on time each month. If you have high balances on revolving accounts such as credit cards, paying them off as much as possible can help reduce your credit utilization. And try to avoid applying for any new loans before your mortgage application, as a hard credit check can lower your score temporarily.

Compare lenders

One of the best ways to guarantee you get the best possible terms on your mortgage loan is to collect multiple offers from different lenders.

You can do this by pre-qualifying with different lenders — when you input your information and the type of mortgage you’re considering, you can get an estimate of the terms they’ll offer. Make sure you look for similar loans (for example, only 15-year mortgages) for the most accurate comparison.

Another option is Ask about pre-approval With multiple lenders. However, these inquiries should be completed within a 45-day period to minimize the impact on your credit.

“Within a 45-day window, multiple credit checks from mortgage lenders are recorded as a single inquiry on your credit report,” according to Consumer Financial Protection Bureau. “You can shop around and get multiple pre-approvals and official loan estimates. The impact on your credit is the same no matter how many lenders you consult, as long as the last credit check is within 45 days of the first credit check.”

With multiple estimates in hand based on your actual application information, you can determine which combination of interest rates, terms and other mortgage details will make the most sense for you. Start comparing mortgage rates you can qualify for today here.

Bottom line

If you want to score the best possible mortgage rate today, you’ll benefit Take a few steps Before you actually apply for your loan. Start by getting familiar with it Current rate environment And what are your options, check your credit and determine if you need to improve it and then compare multiple lenders to get a better idea of ​​your best options. With some pre-planning, you can save a lot of money over the life of your entire mortgage loan.