Find And Negotiate Your Lowest Mortgage Rate
Buying your first home and it can feel overwhelming. There is a lot to know. But while many are willing to devote lots of time to the “fun” part of buying — the home search — about half of buyers neglect the less fun, and possibly more important aspect of buying a home.
If you’re like nearly 50 percent of homebuyers, you won’t hunt for the lowest mortgage rate. You’ll just go to one mortgage lender, pray it accepts your application, and take whatever it’s willing to offer.
That’s not a good strategy and can ruin what otherwise would be a good deal.
Click to see today’s rates (Feb 8th, 2017)
How You Lose By Not Shopping for Mortgages
Homes aren’t cheap, so why make them more expensive with the wrong mortgage? Mortgage rates can fluctuate widely between mortgage lenders and different mortgage types.
(One industry analytics company found that rates routinely vary from .25 percent to .5 percent for the same loans. Paying the lower rate could be like getting a free car in just a few years, or save many thousands over the life of the loan.)
Since fees vary widely, too, you also may lose hard-earned money on upfront costs by choosing the wrong mortgage. By going with the first lender you see, you could end up with higher-than-necessary monthly payments.
As a 2013 study showed, most buyers don’t shop around, because they don’t understand the mortgage process and what’s available to them.
It’s worth it to learn.
Work To Get The Best Deals
Most people check online rates, ask a friend for a referral or let their real estate agent pick their lender. Your monthly mortgage frequently depends on the source of your loan and your financial situation.
All three methods have their pros and cons.
Choosing an online lender is the easiest choice for many. You can get multiple quotes from different lenders and pick the best one.
Studies show that the more quotes from competing lenders you get, the more money you’re likely to save. And online requests are the fastest and easiest way to contact a lot of lenders quickly.
Asking a friend for a referral can be an excellent way to find a trusted lender. But, in most cases, that works only if you have the same financial picture and needs as your friend.
And you you’d have to assume that your friend did the necessary work and got the best deal available at that time.
Should You Go With A “Prefered” Lender?
If you really trust your real estate agent, you may be comfortable with a referral from him or her.
Keep in mind, though, that the agent wants to close the deal, period, or perhaps throw some business to a personal friend. If you pay too much for your mortgage, it does not affect your agent at all.
You have to be your own best advocate when looking for a mortgage. Searching for the right home loan for your economic situation is responsible financial management.
Like the rest of home buying process, it takes work. Use these tips to make a mortgage deal that favors you.
How To Find The Lowest Mortgage Rate
Just as you’re unlikely to buy the first house you see, you probably shouldn’t blindly accept the first mortgage you find.
In addition to working with the right mortgage lender, you need to find the best combination of mortgage rates and fees for your needs.
You also want to pick the right type of mortgage, and there are many choices for first-time buyers. Here’s a strong strategy for making a good choice.
Consider Your Finances
Even those with little-to-no down payment or not-the-best credit may qualify for a mortgage. You’ll want to provide the same information to every lender you contact, so start by getting your finance and credit information together.
Determine your income and your credit rating. You can get credit reports from all three major bureaus by accessing them (for free) at the government’s site, www.annualcreditreport.com. For a small fee, you can also get your credit scores.
Knowing your score lets you see how strong your negotiating power is. Those with high FICO scores have more choices in loans and extra leverage with lenders.
How much down payment and debt do you have can influence the size and type of mortgage for which you qualify.
There are multiple sources of information online and off as well as first-time homebuyer programs nationwide that can help you put together your financial picture.
After you’ve got a handle on your finances, start your mortgage hunt.
Look For Assistance
There is a broad range of mortgage choices, and to get the lowest mortgage rates, you’ll have to know which fits your buying needs. Government-backed or administered home loans are among the most common.
These include FHA, USDA, and VA, Fannie Mae and Freddie Mac.
There are programs offered by national, state and local government agencies. Charitable organizations, industry trade groups and employers may also supply assistance.
See if you meet the requirements for
- those buying fixer-uppers
- low-income purchasers
- certain first-time buyers
- buyers with income not exceeding certain levels
- buyers in certain professions (like nursing or first responders)
- purchasers in rural or redevelopment areas
- disabled homebuyers
- veterans
- those moving into transitional homes
You may qualify for assistance. That can be a grant or loan for your down payment, an interest rate subsidy, tax credit, or other benefit. The Native American Direct Loan is precisely what it sounds like, and state and local governments also offer home loan programs.
Start your research online to learn what’s available. HUD’s State Pages are a great place to begin. Most programs have some sort of homebuyer education requirement, so plan on taking the time to complete it before shopping for a mortgage.
Click to see today’s rates (Feb 8th, 2017)
Find The Right Program
Many first-time home buyers get conventional loans. They automatically choose a 30-year, low interest fixed rate mortgage.
Since, according to the Nationalk Association of Realtors (NAR), younger buyers tend to sell and move in just five years, you’re likely to save by choosing a hybrid ARM with a starting rate that fixed for three, five, seven or ten years.
In fact, you could lock in a very low rate, and loan terms protect you from large annual jumps in interest rates.
Like the other loans mentioned above, do your homework so you find the ARM that fits your economic needs and has the lowest rate mortgage you can get.
Find The Right Lender
Contact at least four mortgage lenders. Find those who specialize in the property and mortgage type you need.
To get the same general rates for your type of mortgage loan product, make inquiries in a single day. Provide all lenders with the same information — your credit rating, purchase amount, down payment, etc.
Get your quotes quickly, but go through them slowly. Compare terms, rates and fees.
Complete mortgage applications in the same 14-day period, since this limits the effect on your credit score. Credit bureaus treat a group of inquiries from several mortgage lenders in a short time as a single credit inquiry.
What Are Today’s Mortgage Rates?
Because mortgage rates frequently change, often dramatically in the same day, it’s best to shop for mortgages within a short timeframe.
Once you identify the loan that works best for you based APR, fees, and points, get pre-qualified and try to lock in the lowest mortgage rate you can.
Click to see today’s rates (Feb 8th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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