Sure, you’ll have an easier time getting a great mortgage rate if you’re a billionaire. Facebook founder Mark Zuckerberg refinanced his home with a 1.05 percent adjustable-rate mortgage last July, according to Bloomberg News. But you, too, can get a sweet deal on a home loan with some extra planning, paperwork, and patience.
Average mortgage rates were still near record lows in September, 2012: 3.55 percent on 30-year fixed-rate loans and just 2.61 percent on one-year adjustable loans, according to the Federal Home Loan Mortgage Corp., known as Freddie Mac. Only 19 months earlier, 30-year fixed mortgage rates averaged 5.26 percent. The drop translates into monthly payments of almost $200 less on a $200,000 mortgage. For buyers who have been stuck on the sidelines since February 2011, when rates hit their most recent peak, the decline now cuts annual carrying costs by nearly $2,300.
Home prices are possibly bottoming out in many markets, according to the latest forecast by Zillow.com, which tracks the value of more than 100 million U.S. homes. So now may be the time for buyers to think about getting into or re-entering the market and for owners to consider refinancing to a lower mortgage rate.
There is still the matter of today’s tighter lending standards, which can be daunting. “The four horsemen of today’s tougher underwriting to qualify for the best rates are documented income, a high credit score, a significant down payment, and a low debt load,” says Keith Gumbinger, vice president of HSH Associates, a New Jersey-based publisher of mortgage and other lending rates.
Here’s how to clear seven hurdles between you and the lowest possible rate.