A Guide to Getting the Best Mortgage Rate
Many of us want to own a home. Whether it is a comfortable bungalow or a sleek condo, owning a home means saying goodbye to paying rent and having a place of your own. However, the high cost of owning a home makes this a pipe dream for many people.
This high cost is what makes many homeowners seek a mortgage loan to finance the purchase of their dream homes. Part of this search involves looking for the best mortgage rates before taking a mortgage. This article is written to give aspiring homeowners a step by step guide on how to get the best mortgage rate in the market.
Be Prepared To Shop for A Good Mortgage
Many home buyers are prepared to hunt for a good home but not as well prepared to hunt for a mortgage. For instance, research done by HSBC shows that many homeowners do not bother researching the best mortgage rates. If you do not have the time, a mortgage specialist can help in this search and save you lots of money and time.
The good thing about hunting for the best mortgage rate is that a saving of even 1% on your rate can save you a lot of money as you repay your loan. According to Forbes, a good mortgage rate can save a homeowner thousands of dollars in the course of their loan repayment period.
Compare Rates Using Online Comparison Sites
According to the Federal Reserve Bank in the US, the average price of owning a home is about $302,300, and the average household income in the same country is $60,000. It is alarming that buying a home will cost a homeowner five times his or her average income. However, thanks to technology, with the click of a button you can compare mortgage rates in different states or countries to get the most competitive rates. Sites such as Ratehub.ca, CFPB, bankrate.com, Zillow.com to name but a few can help you get an idea of the mortgage rates in the market.
However, ensure you read the fine print that comes with the lower rates as some will require you to meet strict requirements while others are only offered by the brokers who have advertised on the online sites.
Look For Lenders Offering the Best Rates
While the comparison sites can help you find the lenders offering the lowest rates, they will need you to provide your personal information. A mortgage agent with the right knowledge will advise you that if you value your privacy, you are better off searching the lenders on your own. Here’s how:
- On the search engine key in your location
- Followed by the interest rate
- Lastly, include the repayment period
Your search entry should look like this: Dallas mortgage, 3.45% interest rate, 15 years fixed rate.
The lenders offering the rates keyed in will appear at the top of the search engine.
Negotiate With Multiple Banks
After doing your due search, go with your best rates to multiple banks and try to get a commitment that they will lend you the money. This is also referred to as getting pre-approved for your mortgage rate. You will be given a pre-approval letter that shows this commitment. This will give you an advantage with homeowners since it means you are likely to get access to the loan once you decide to purchase a house.
However, be aware that if you seek a pre-approval letter from too many banks, this can negatively impact your credit score due to many credit inquiries. Further, the mortgage rate might change as you continue looking for a home. Thus, you can ask your bank to lock in your existing mortgage rate for a fee.
Seek Loan Estimates from The Banks
Once you find a home to buy, seek for loan estimates from the banks that gave you a pre-approved letter. This will help you make comparison among the banks in terms of interest rates, monthly repayment amounts, and the total loan given. It will also ensure you make a well-informed decision on the mortgage to take.
Make A Large Down Payment
Although it is possible to get a mortgage after a small down payment, a bigger down payment might mean a slightly lower interest rate. Talk to your bank and inquire if you qualify for a lower interest rate if you pay a higher down payment.
Although shopping for a mortgage is one way to get the best mortgage rates, there are other factors that can help you influence your mortgage rates such as:
- Credit score – since a better credit score means a better rate
- Location of your intended home since rates are different in various states
- Size of the mortgage. Smaller mortgages have higher interest rates compared to bigger loans.
- Mortgage term where a shorter mortgage term will likely have a lower rate than a longer mortgage term
- Taking advantage of buying points
Looking for a mortgage might seem like a difficult task, but it becomes easier if you do your homework before applying for one. The above steps will help you get the best mortgage rates so that you can save more in the long run.