How to Get the Best Mortgage Rates in San Antonio

Buying a home is one of the most significant financial decisions you’ll make, and securing the best mortgage rate is key to keeping your monthly payments low and maximizing your investment. In San Antonio’s competitive real estate market, getting the best mortgage rate requires careful planning and a bit of strategy. Here’s how you can improve your chances of securing a favorable mortgage rate.

1. Improve Your Credit Score

Your credit score is one of the most important factors lenders consider when determining your mortgage rate. A higher credit score often translates to lower interest rates, as it shows lenders you’re a responsible borrower. If your credit score could use some improvement, take the following steps:

Steps to Improve Your Credit Score:

• Pay Bills on Time: Timely payments on your credit cards, loans, and other bills can boost your credit score.
• Reduce Credit Card Debt: Keep your credit card balances low by paying down debt. Aim to keep your credit utilization below 30%.
• Avoid Opening New Accounts: Don’t open new credit cards or loans before applying for a mortgage, as this can negatively impact your credit score.
• Check for Errors: Review your credit report for any errors or inaccuracies that could be dragging your score down. Dispute any incorrect information.

Tip: Aim for a credit score of 700 or higher to qualify for the best mortgage rates. Lenders generally offer the best rates to borrowers with credit scores in the excellent range (740+).

2. Save for a Larger Down Payment

The larger your down payment, the more favorable your mortgage rate may be. Lenders often offer lower interest rates to buyers who put down at least 20% of the home’s purchase price because it reduces the lender’s risk.

Why a Larger Down Payment Helps:

• Lower Interest Rates: With more equity in the home, you’re less risky to the lender, which can lead to better rates.
• Avoid Private Mortgage Insurance (PMI): By putting down at least 20%, you can avoid paying PMI, which can save you money on your monthly mortgage payment.

Tip: If you can’t afford a 20% down payment, aim for at least 10-15%. Lenders may still offer competitive rates with a smaller down payment, especially if your credit score is strong.

3. Shop Around for Lenders

Mortgage rates can vary significantly from lender to lender, so it’s essential to shop around and compare offers from multiple lenders. Even a small difference in interest rates can save you thousands of dollars over the life of your loan.

How to Compare Lenders:

• Get Quotes from Multiple Lenders: Request quotes from at least three to five lenders, including local banks, credit unions, and online mortgage companies.
• Compare Loan Terms: Don’t just focus on the interest rate. Compare other loan terms, such as closing costs, loan fees, and the type of loan (fixed-rate vs. adjustable-rate).
• Use a Mortgage Broker: Consider working with a mortgage broker who can help you find competitive rates from multiple lenders.

Tip: Use online tools like mortgage calculators to estimate your monthly payment and total interest costs based on different rates. This will help you make an informed decision.

4. Choose the Right Loan Type

The type of mortgage you choose can also impact the interest rate you’re offered. Understanding the different loan options available can help you select the one that fits your financial situation and goals.

Common Mortgage Options:

• Conventional Loans: These loans typically offer the best rates for buyers with good credit and a solid down payment. They can be used for primary residences, vacation homes, and investment properties.
• FHA Loans: Backed by the Federal Housing Administration, FHA loans are ideal for buyers with lower credit scores or smaller down payments. However, they may come with higher interest rates and mortgage insurance premiums.
• VA Loans: If you’re a veteran or active-duty military member, VA loans offer competitive rates and don’t require a down payment.
• Adjustable-Rate Mortgages (ARMs): ARMs may offer lower initial rates, but they can increase over time. If you plan to stay in the home for a shorter period, an ARM might save you money.

Tip: Work with your lender or Realtor to discuss the pros and cons of each loan type to determine which one will provide you with the best rate and terms.

5. Lock in Your Rate

Once you’ve found a favorable rate, consider locking it in with your lender. Mortgage rates can fluctuate based on market conditions, so locking in your rate ensures that it won’t change before your closing date.

How Rate Locks Work:

• Rate Lock Period: Most lenders offer rate locks for 30 to 60 days. If your closing takes longer, ask about extending the rate lock, though this may come with additional fees.
• Rate Float: Some lenders offer a "float-down" option that allows you to lock in a rate but still take advantage of lower rates if they drop before closing.

Tip: Lock your rate when you feel comfortable with the terms, especially if market trends suggest that rates are likely to rise.

6. Pay Discount Points

Discount points are upfront fees you can pay at closing to lower your interest rate. Each point is equal to 1% of the loan amount, and paying points can reduce your rate by a certain percentage. This is a good option if you plan to stay in the home long-term.

Benefits of Paying Points:

• Lower Interest Rate: Paying points can lower your rate and reduce your monthly payment.
• Long-Term Savings: If you stay in the home for many years, the savings on interest can outweigh the upfront cost of paying points.

Tip: Calculate how long it will take to break even on the cost of the points versus the interest savings to ensure it’s a worthwhile investment.

7. Improve Your Debt-to-Income Ratio

Lenders look at your debt-to-income (DTI) ratio to assess your ability to make mortgage payments. A lower DTI ratio makes you a more attractive borrower, which can lead to better mortgage rates.

How to Lower Your DTI Ratio:

• Pay Off Debt: Focus on paying off high-interest debts like credit cards and car loans before applying for a mortgage.
• Increase Your Income: If possible, increase your income through side jobs or overtime to improve your DTI ratio.

Tip: Aim for a DTI ratio of 36% or lower to qualify for the best mortgage rates. Lenders prefer borrowers with a DTI ratio under 43%.

8. Consider Shorter Loan Terms

While 30-year fixed-rate mortgages are the most common, opting for a shorter loan term, such as a 15-year mortgage, can result in a lower interest rate. Shorter loan terms reduce the lender’s risk and typically come with lower rates.

Benefits of a Shorter Loan Term:

• Lower Interest Rate: Lenders often offer significantly lower rates on 15-year mortgages.
• Less Interest Paid Overall: You’ll pay less in total interest over the life of the loan with a shorter term.
• Build Equity Faster: With higher monthly payments, you’ll pay down your principal faster and build equity more quickly.

Tip: Consider whether you can afford the higher monthly payments of a shorter loan term. If so, the long-term savings can be substantial.

Conclusion

Getting the best mortgage rate in San Antonio involves improving your credit, saving for a down payment, shopping around, and understanding your loan options. With careful planning and a solid strategy, you can secure a favorable rate that helps you save money over the life of your loan.

For personalized advice on securing the best mortgage rate in San Antonio or finding your dream home, reach out to Brad Burnes, a trusted local Realtor. Brad has extensive knowledge of the local market and can connect you with top mortgage professionals to help you navigate the home-buying process. Contact Brad Burnes today to get started!