Florida is attracting families from all over the U.S. with great weather, excellent jobs, and affordable housing. All that goodness doesn’t mean you shouldn’t also get the best deal you can on your mortgage.
Whether you’re a local looking to buy or a newcomer aiming to put down roots, we review some top mortgage rate tips to help you secure your place in the Sunshine State.
How to Get the Best Mortgage Rate in Florida
Florida’s fast-growing cities offer plenty of places to snap up a new home, but that does not mean the Gulf State’s real estate market isn’t competitive. Increased demand for housing and rapid interest rate increases in recent years have seen the monthly cost of a new mortgage more than double in many areas.
If you’re in the market for a new home, it’s critical to secure the lowest rate you can. The difference of just a point or two on your 15- or 30-year mortgage will cost you thousands of dollars over the life of your loan.
That’s why it’s worth taking your time now—and in some cases spending a little more upfront— to get a mortgage rate that is going to work for you over the long term. So, whether you’re actively looking for a home or just starting to crunch the numbers, here are our top 10 tips to get the lowest mortgage rates in Florida.
1. Boost Your Credit Score
Your credit score is the single biggest factor determining the rate you are likely to get. While a higher score will also get a better rate, you will need to have a score of at least 700 to qualify for the best available rates.
Ideally, you should aim to build your creditworthiness up over several years to allow you to qualify for a great rate. But it’s still worth doing everything you can to boost your score in the months just before buying.
You can do this by downloading your free credit report from one or more agencies here and checking it for:
- Factual inaccuracies
- Unpaid bills
- Credit accounts you do not recognize
Contact the credit bureaus or the relevant merchants to correct details or dispute any accounts or credit checks you did not authorize. Also do everything you can to pay down outstanding debt, especially high-interest revolving debt like credit cards or store accounts.
2. Lower Your DTI Ratio
Your debt-to-income ratio (DTI) compares how much you need to pay servicing your debt each month compared with your monthly income. It’s a major part of the formula the credit agencies use to calculate your credit score, but lenders will also look carefully at the effect a new mortgage will have on your DTI when calculating the rate you will be offered.
As a general rule of thumb, many lenders will look for a DTI below 43% including your mortgage payment for many first-time home buyers, and may refuse funding to applicants who cannot meet this on their current income.
To lower your DTI you need to pay off outstanding debt on your existing personal, student, or auto loans—as well as on revolving debt like credit cards or lines of credit.
3. Shop Around
Mortgage lending is an incredibly competitive business, so it’s important to shop around for the best deal. Talk to several different types of lenders including banks, credit unions, mortgage specialists, and online lenders about your financing needs and personal situation.
Ask 2-3 lenders with the best combination of rates and other services to pre-approve you for a loan by running a hard pull on your credit report. This will give you actual rate numbers to compare. While a low rate number is great, be sure to consider the term and other factors to determine the actual amount of money you will need to come up with every month.
4. Leverage Down Payments
Another major factor determining the rate you will get on your home loan is the amount of cash you have available to put down. Lenders are more generous to homebuyers who can put more “skin in the game” — ideally 20% of the home value for most 30-year fixed loans.
Well-prepared buyers will have been saving for some time before applying for a loan, but every dollar you can put down now will save you many times that amount in payments with a lower rate. So talk to family or close relatives about giving you a cash gift that will pay rich dividends in the coming years. Gifts that go towards home down payments can also often be made tax-free.
You can estimate the effect of different down payments on your loan rate using Radiant Credit Union’s loan calculator here.
5. Choose the Right Loan Term
The term of your loan will also have an impact on the rate you will be able to receive. While a 30-year loan allows you to lock in a rate for longer, you’ll almost always get a lower rate on a 15-year loan. If you can sustain the higher monthly payment, you’ll build equity in your home faster and pay less in interest while doing so.
Adjustable rate mortgages (ARMs) are also a popular option for first-time buyers, especially if you are reasonably sure you will be able to refinance or sell your home within a few years. ARMs offer a lower initial rate that resets to a higher rate after a set period—typically 2-5 years.
6. Consider Different Mortgage Types
Credit unions and banks offer different types of loans. Choosing one that suits your needs can help you lock in a low rate while minimizing other costs like down payments or mortgage insurance. The most common loan types include:
- Conventional loans: If you have a good credit score and are able to put 20% down, you will usually get a good rate and avoid having to pay mortgage insurance on a conventional loan. Government-backed loans underwritten by Fannie Mae and Freddie Mac allow many lenders to qualify for conventional loans with less than 20% down.
- FHA loans: Loans underwritten by the Federal Housing Administration (FHA) are designed to be affordable with lower rates and down payments, but usually require you to pay mortgage insurance on top of your monthly house payment.
- VA loans: Loans backed by the Veterans Association (VA) allow qualifying former service members to buy homes, generally with little to no money down and at competitive rates with no minimum credit score.
- First-time buyer programs: Many lenders and underwriters (including the FHA) offer special rates or breaks on down payments and closing costs to first-time home buyers. Educators, first responders, health workers, and city and state employees can also often qualify for special rates or terms, especially at local lenders like credit unions.
7. Lock in a Rate
If you accept funding from a lender and make an offer on a home, a mortgage rate lock ensures the rate you are offered will not change by the time the sale of the house closes. This can help you keep a good rate in hand if you expect interest rates to rise soon or if you are worried about construction delays on a new-build home.
8. Pay Down Points
If you have extra cash available you may be able to “buy down” the final rate you are offered on a mortgage. Your loan offer will outline how much you will pay to buy down the rate by 10s or 100ths of a percentage point.
While this will add up to a lot of money in interest payments over the life of a 15- or 30-year loan, if you have significant extra cash available when buying a loan, it is generally more effective to put this into your down payment.
9. Keep Your Credit Score Steady
After all the hard work you’ve done to secure home financing, the worst thing you can do is take on other debt or open a new credit card just when your loan is still closing. If your lender needs to recalculate your rate, it might end up costing you far more over the life of the loan.
10. Consider Joining a Credit Union
If you’re buying in a specific area, consider talking to the local credit unions about your financing needs. These nonprofit financial co-operatives often offer lower rates, especially for first-time buyers. They also typically know the local market better than the big lenders and you’ll often work directly with the actual loan officers processing your application.
Credit unions are more focused on service and building long-term relationships with their members. They’re also required to keep a larger stake in home loans they approve on their own books. Like you, credit unions consider buying and financing a home a long-term commitment.
Current Loan Rates in Florida
While Florida in general has more housing stock available than many other coastal areas, housing is also in demand in the state, especially in large coastal cities. So, while actual rates will vary by area, average mortgage rates in the state do track with those at the national level.
According to property services group Zillow, rates for 30-year fixed-rate mortgages in early December 2023 in all markets in Florida averaged around 6.75% annual percentage rate (APR) compared with a nationwide average of 6.7%.
That said, rates will vary in markets across the state. For example, for a 30-year, fixed-rate mortgage on a $300,000 home in suburban Gainesville with 20% down, well-qualified borrowers could expect offers of rates in a range from $6.14 to 7.0% APR from major commercial lenders.
Local lenders are often able to offer lower rates tailored to your individual needs. Contact Radiant Credit Union today to find out about the best rates available for your neighborhood.
Radiant Credit Union: Your Local Home Loan Expert
Local lenders like Radiant Credit Union do more than offer great rates on local properties. At Radiant we offer first-time buyers:
- A 60-day rate lock
- Loan terms between 10 and 30 years
- Down payments as low as 5% of purchase price
- Single-family home loans up to $1 million
And, whether you’re shopping for a first home, vacation home, or a refinance of an existing home, we offer easy online applications and fast preapprovals, plus add-ons like homeowners insurance.
Contact us today to find out how we can help open doors for you in Gainesville or click below to learn more about the outlook for Florida home prices in 2024.