Editors' pick: Originally published Feb. 1.
U.S. mortgage rates have risen in the aftermath of the presidential election, as potential homeowners face higher monthly payments amid a stagnant economy with slow wage growth.
Of course, potential homeowners in the U.S. can take advantage of the continuation of low mortgage rates since the Federal Reserve has only increased interest rates once in December 2016.
But, how do you snag the absolute lowest rates for a traditional 30-year fixed rate mortgage, especially if you are a first-time homebuyer?
How to Get a Low Rate
Low mortgage rates can play a large factor in homeowners being able to save tens of thousands of dollars in interest. Even a 1% difference in the mortgage rate can save a homeowner $40,000 over 30 years for a mortgage valued at $200,000. Having a top notch credit score plays a critical factor in determining what interest rate lenders will offer consumers, but other issues such as the amount of your down payment also impact it.
A high credit score is the key to ensuring that borrowers receive a low mortgage rate. Here's a quick rundown of what the numbers mean - a score of anything below 620 ranks as poor, 620-699 is fair, 700-749 is good and anything over 750 is excellent. Think carefully before canceling a credit card with a long, positive history, but decrease your debt. One of the biggest factors which impacts your credit score is your credit utilization rate.
Many potential homeowners focus only on the interest rate or the monthly payment. The APR (or annual percentage rate) gives you a better idea of the true cost of borrowing money, which includes all the fees and points for the loan.
The origination fee or points is charged by a lender to process a loan. This fee shows up on your good faith estimate (GFE) as one item called the origination charge. However, the origination fee can be made up of a few different fees such as: processing fees, underwriting fees and an origination charge.
Homeowners who are able to afford a 20% down payment do not have to pay private mortgage insurance (PMI), which costs another 0.5% to 1.0% and can tack on more money each month. Having at least 20% in equity shows lenders that there is a lower chance of the individual defaulting on the loan.
Here are the top five lowest rates for a 30-year mortgages, according to RateWatch, a Fort Atkinson, Wis.-based premier banking data and analytics service owned by TheStreet, Inc., which surveyed the majority of institutions in the U.S. from January 23 to January 30.
Gulf Winds Federal Credit Union is headquartered in Pensacola, Fla. and offers a rate of 3.875%.
Harvesters Federal Credit Union is headquartered in Cantonment, Fla. and offers a rate of 3.875%.
Security State Bank & Trust is headquartered in Fredericksburg, Texas and offers a rate of 3.5%.
Panhandle Educators Federal Credit Union is headquartered in Panama City, Fla. and offers a rate of 3.5%.
First Basin Credit Union is headquartered in Odessa, Texas and offers a rate of 3.5%.