The vast majority of home buyers get a mortgage. With houses costing on average $200,000 and up in most cities, only the very wealthy are able to buy a home in cash. Though mortgages have low rates compared to other loans, because they have such a long term, the amount that you end up paying in interest is much higher than a credit card. So what can you do to find the mortgage that is best for you and your family?

Watch the Housing Market

The housing market is going to be a huge determining factor in what kind of mortgage you can get. When the market is doing really well, you will find that a lot of mortgage companies and banks will offer lower interest rates in order to get you to choose them to finance your home purchase. You will also be able to buy a better home for a decent price. But don’t be fooled just because the numbers look good at the beginning. Make sure you look at the terms closely so you can be sure that you aren’t signing for a low rate that will shoot up later.

Shop Around

Each mortgage company has underwriting guidelines that are slightly different, which means every company could offer you slightly different rates. One mortgage company might put more emphasis on your credit score while another might focus more on your income and job stability. That’s why it’s important to shop around and get quotes from different lenders. You should get at least three mortgage estimates, and you can work with a mortgage broker to get even more.

Pay Discount Points

Discount points are upfront payments that allow you to buy down the interest rate on your loan. Discount points cost one percent of the loan amount and will reduce your interest rate by a quarter of a percentage point. If you have enough funds to pay discount points, it can allow you to get a lower mortgage rate and save money on interest costs. It typically takes several years to recoup the upfront investment you make in discount points, so to make it worth your while, you should be sure you are going to live in your house long enough to recoup what you spend.

Negotiating a mortgage rate can take work, but it is worth your while to get the lowest rate you can. Even the smallest reduction in interest can save you tons of money over the life of your mortgage.

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