5 Smart Moves to get the best rate

If you're in the market for a home, there are 5 smart moves you can make to help you qualify for the cheapest possible mortgage.

The tantalizing rates lenders put in their ads are for borrowers with the best credit scores, substantial down payments and the biggest gap between how much they earn and how much they owe each month.

Many home buyers may pay a lot more, but you don't have to be one of them.

With lenders demanding better credit scores, bigger down payments and lower debt-to-income ratios before they offer a mortgage, you have to improve your numbers.

Plan ahead so that when you go for that loan, you're showing your best financial face. Every tenth-of-a-point is worth fighting for.

Smart move 1.

Pay all your bills on time.

More than ever, a good credit score is essential if you want a good mortgage rate. And the biggest part of your credit score -- 35% of it -- is based on whether you pay your bills on time.

When you apply for a mortgage, you should have no late pays on your credit report for six months - minimum. According to Smart Money magazine, one missed payment could lower your score by as much as 75 points.

More than anything else, lenders want assurance that your mortgage payments will come in on time every month. If your credit history shows you've skipped a payment or even been a few days late, you're seen as a bigger risk. And risky borrowers pay higher rates -- or they don't get a mortgage at all.

A late payment only weeks or even a few months before applying for a mortgage will be taken particularly seriously.

Smart move 2.

Make a larger down payment.

Lenders have learned that the more money you put down on a home, the less likely you are to default. So ask if you're near a cutoff point. If adding a few thousand dollars would lower your rate by a quarter-point or more, consider dipping a little further into your savings. Or sell something of value to raise money.

Smart move 3.

Reduce your debt.

Lenders look at the total amount you owe and your monthly payments. They want to be sure that you can afford to make all of your current payments and the new mortgage payment they are about to pile on top of that.

Reducing your debt load will also improve your credit score, especially if your credit card debt is bouncing up against your credit limit.

Your goal should be to reduce those balances to less than 50% of your limit. The lower the better. Hold off on purchasing big-ticket items like furniture, major appliances or a car until after you get your mortgage.

Smart move 4.

Don't apply for new credit cards or other consumer loans.

Potential lenders will check your credit report when you fill out an application, and those inquiries are noted on your history. Each inquiry can lower your credit score by up to 12 points.

Smart move 5.

Shop around.

Don't let the credit inquiry issue stop you from seeking quotes from at least three lenders. Fair Isaac Corp.'s widely used scoring system counts a flurry of inquiries from mortgage lenders as a single one. When you do apply for a mortgage, get ready for the flood gates to open. You'll receive numerous offers in the mail. Chances are good those offers won't have the best rates. So toss them in the recycle box after you shred them.

It's particularly important that you don't limit yourself to your bank, credit union, or existing lender.

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