You may call up to three different lenders while shopping for a mortgage and each one could give you a different interest rate. While criteria on your end is set, credit score and salary, lenders have different means of interpretating your criteria. Your choices of lender can make all the difference in scoring a lower interest rate or being stuck with a higher rate.
More than half of borrowers do not comparison shop when it comes to lender selection. Think about this: you shop around for furniture, cars, and sometimes even basic necessities such as groceries. Checking out various mortgage options is just as important and you could save a ton of money over a period of time. Lower interest rates means you will pay less toward a monthly mortgage which means more of your money can stay put in your bank account!
Finding the right lender is the first step. Do the research and ask the questions!
Choose your numbers
Do some research before you approach a lender. Research competitive interest rates and learn the amount of your expected monthly payment when you select a satisfactory rate. You will know which questions to ask when discussing the application process with lenders.
Use a comprehensive mortgage calculator in order to determine what you could pay each month based on the home's price and loan terms. Compare various mortgage term lengths to see how they affect the amount of interest you hope to pay. Understand how closing costs could affect your interest rates.
Interest rates are the largest variables for mortgages as the value of the home and the amout you can put down are unlikely to be changed. Even though your credit score is a key determining factor, some lenders might be able to offer better deals than others. Once you zero in on your top two choices, request interest rate quotes from the lenders within a seven day period then compare the options.
Quotes generate hard inquiries on credit reports and too many inquiries spread out of a lengthy period of time could cause a significant dip in your credit score. If all the inquiries take place within a seven day period, they will only count as one inquiry. Do the research within a one-week span in order to skip the dings!
Ask 3 questions of your lender(s) in order to secure the best rate.
- Are points included? Inquire as to whether points (fees paid to the lender upon closing in exhcnage for a lower interest rate) are included in the mortgage quote. Make sure you fully understand the point system along with the pros and cons of using them. You may also determine via your own research ahead of time whether paying points is a good move for you.
- How will the size of my down payment impact interest rates & loan fees? Find out whether you will be required to pay PMI (private mortgage insurance) in the event you put less than 20% down on your new home. The answer to this question may affect the rest of your fees.
- Inquire about locking in interest rates and their longevity. Ask how you may go about locking in a quoted interest rate. The rate may change if you wait too long between getting the quote and actually applying for the mortgage. You can avoid having to ask for another quote with a potentially higher rate by locking in a rate for which you have already budgeted. Locked rates are not permanent even though there's usually an expiration date. Make sure to ask how long the lender will honor the quoted rate once it is locked.
Mortage loans are not standard across the board so it is esepcially important to do your research and be prepared to ask questions in order to secure the most desirable interest rate, resulting in savings over the lifetime your loan.