When it comes to a home loan, the interest rate is a very important factor. It can make all the difference between being able to afford the home of your dreams and having to settle for something less. On a large mortgage, even a slight increase in the interest rate can make a big difference in the monthly payments. Thus, getting the best interest rate possible is the goal of every home buyer.

• Your Credit Is Key

The number one factor in determining what kind of interest rate you will get on your home loan is your credit rating. Keeping tabs on your credit is important for anyone, but especially for those hoping to own a home. Before you apply, you should check your credit report for any errors that you can correct ahead of time. You should also look for anything you can do to improve your credit.

If you have a high debt to income ratio it will hurt your credit. Try to pay off things like high interest credit cards before you apply for a home loan, or at least pay them down to a place where that ratio is improved. You should also avoid applying for credit in too many places-too many checks on your credit can adversely affect your score.

• Lock It In

When rates are low, you should get that application for a loan in as soon as you can. In most cases you can lock in a certain interest rate for a particular period of time. Interest rates fluctuate all the time, and sudden changes in the economy can send them up. When they are low, you should be prepared to take advantage. Even with imperfect credit, the higher interest rate in a low set of rates is the better deal, so get it while you can.

• Go With Who You Know

In some cases, a financial institution may offer a slightly lower interest rate to long time customers. Because they know your financial history and you have built trust with them, they will be more willing to disregard small credit problems and give you a better rate.

Your interest rate will make a big difference in how fast you pay off your home and how much you can afford. Be sure you do whatever you can to qualify for and lock in a great rate.