How To Shop Mortgage Rates

When contemplating a substantial purchase, researching for the best price is typically the best course of action. We shop prices for a car, and should do the same when looking for a home mortgage loan. The interest rate charged will determine the cost of the mortgage and how much house you can afford. Rates vary with different lenders and will significantly affect how much interest you pay over the life of the loan. For example, a $250,000 30-year fixed-rate mortgage at 4.5% would make a monthly mortgage payment of $1266.71. At 4%, the monthly payment would drop to $1192.54, which is $26,342 less over the life of the loan. Below are a few factors to keep in mind when shopping for loans.

Do Your Research

Make a list of features you must have in your loan. For instance, do you need a fixed rate or adjustable rate loan? An adjustable rate mortgage, otherwise known as ARM, is a conventional loan with an interest rate that changes after the initial set time. An ARM loan benefit is a lower monthly cost at the beginning of the loan. However, this rate is subject to increase, and budget planning is more difficult when rates vary month to month. A fixed rate loan is a conventional loan that has a set rate of interest over the life of the loan. The benefit of this type of loan is predictability when it comes to payments, however, the initial price will be higher than an ARM loan. Another question to consider is whether you will be refinancing in a few years? If so, make sure there is no prepayment penalty.

Check Your Credit Score

FICO establishes the global standard for measuring credit risk in mortgage, banking and credit industries by establishing individual credit scores. FICO scores are the credit scores most lenders use to determine your credit risk and the amount of loan available to you. Check your credit before beginning the process of finding a loan. Without knowing your credit score, you could stand to lose money, or your potential home. If there are discrepancies, work to increase your score or dispute errors on the report. Every twelve months you are entitled to one free report from Equifax, Experian and TransUnion. However, you can retrieve all three scores at Most lenders will look at all three FICO scores, one from each major credit bureau when evaluating your loan application.

Shop Multiple Lenders

MyFICO, the consumer division of FICO, suggests receiving mortgage offers from several lenders, knowing that loan packages can be tweaked. Using your list of loan requirements, ask each lender how they are willing to address each point. If you know you want a 30-year fixed rate, don’t let lenders quote you for a 5-year fixed interest rate. Factor in final costs such as, title insurance fees, attorney’s fees, and document prep fees, to be included in final quote. Let the lenders know you will be comparing their offer with other lenders. All lenders are eager for your business and may offer incentives or lower final costs to obtain it!

For more information regarding mortgage loans, residential or wholesale, contact Dave Kevelighan today.