In recent years, rates on 15-year mortgages have been amazing. About five years ago they hit an all-time low, averaging 2.56%, though lately they've been rising.
Here are four tips on how you can still get the very best deal on a 15-year mortgage.
1. Compare loans
Most mortgage lenders offer both 30- and 15-year terms. Compare the current average rates between the two loan products, then zero in on a couple of lenders and look at the spreads.
If 15-year mortgage rates don't seem substantially lower, it may not seem worth it to accept the higher monthly payment that comes with the shorter-term loan.
Still, the long-haul savings can be considerable.
On a $200,000 loan, you might qualify for a 15-year mortgage at 3.5% or a 30-year loan at 4.3%. You'd pay total interest of around $57,000 over the term of the 15-year loan, versus $156,000 during the life of the 30-year mortgage.
2. Compare lenders
Once you settle on a 15-year mortgage, gather rates from multiple lenders.
Check the mortgage websites for the major banks that operate in your area, such as Bank of America, Wells Fargo and Chase. They often have similar pricing on their mortgages, but you may find one offering a cheaper rate or more favorable terms.
Savvy borrowers may find more affordable rates through small local banks and credit unions, but the approval processes may be slower.
3. Put your best credit foot forward
A lender wants to feel confident that you'll pay back the loan and not default. A good credit score will help provide that assurance.
If your score could be better, obtain copies of your credit reports from the three major credit reporting bureaus (Equifax, TransUnion and Experian) and make sure they're accurate.
Bad information — such as debts that aren't yours, or debts that are too old — can weigh down your credit score.
Shore up your score by paying down debt (especially credit card balances), getting bill payments in on time and not opening new credit accounts while you're shopping for a home loan.
4. Pay as much as you can upfront
A larger down payment on your home can bring you a lower 15-year mortgage rate.
Like a decent credit score, a bigger down payment is a way of demonstrating to the lender that you're a good risk and deserve a low rate. If you're heavily invested in your new house, it's less likely that you'll walk away from your mortgage.
Plus, putting at least 20% down will keep troublesome private mortgage insurance (PMI) premiums from being tacked onto your house payments.
Not sure how you could possibly scrape together that kind of down payment money? If you're a first-time homebuyer, you might be able to get a grant, low-interest loan or other down payment assistance.