6 ways to shop for the best mortgage rate
Once you've organized your information and identified the right loan, follow this advice.
If you're in the market for a mortgage, chances are you've been instructed to shop around for the best rates. But just because you've been told to shop around doesn't mean you know how. (Bing: How low are interest rates this week?)
First, you'll need to contact one lender to get your credit score. Craig March, a personal mortgage consultant with Inlanta Mortgage in Janesville, Wis., says you should share your credit score with other lenders rather than letting each one pull your credit because having too many inquiries could lower your score.
"There are so many different credit-score models that the score you see as a consumer may not be the same as the one a mortgage lender sees, so it's important to get your score from a lender," says Mark Richards, a senior mortgage-loan officer for TD Bank in Washington, D.C.
Brian Martucci, a mortgage lender with GetLoans.com in Washington, D.C., says that every borrower must be prepared to provide the following information before lenders can provide an accurate rate quote:
- How large is your down payment? Interest rates vary according to your loan-to-value ratio.
- Are you buying a single-family home or a condominium? Martucci says a borrower purchasing a condominium with a loan to value above 75% will pay a one-quarter percent higher interest rate.
- Are you refinancing or purchasing? Interest rates may be higher on a refinance, especially if you are taking out cash, which could raise your rate by one-eighth of a percent.
- And if you intend to waive escrow and pay your taxes and insurance yourself, your mortgage rate could be one-eighth of a percent higher because that's considered a riskier loan, Martucci says.
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6 steps to shopping for the best mortgage rates
No. 1: Establish a baseline. Get a referral from someone you trust and contact that lender to obtain your credit score and discuss your loan options. Your first lender can help you compare Federal Housing Administration and conventional financing, as well as various loan terms so you can make an informed decision on which loan program and term you want before you contact other lenders.
No. 2: Contact a mix of financial institutions. Interest rates fluctuate constantly for a variety of reasons, including the occasional promotion of a particular loan product by a financial institution. For example, some lenders who are eager to generate more purchase loans might offer the best mortgage rates for homebuyers rather than refinancing homeowners, Martucci says. Sometimes a credit union or bank will introduce a new loan product and offer better mortgage rates to entice borrowers, March says.
"It's best to diversify and try a mix of places such as a direct lender, a regional bank, a credit union, a community bank and a national bank," March says.
- MSN Money: Check out this refinancing calculator
No. 3: Know when you want to close. The length of your lock-in period will impact your mortgage rate, so discuss your target close date with each lender and ask what they charge for different loan-lock periods.
- On our blog, 'Listed': New federal rule: Make sure borrower can pay loan
"Make sure you tell the lender when you expect the closing to be, because you want to lock in the interest rate for the right length of time," Richards says. "Many lenders charge one-eighth percent more if you must lock-in the loan for 60 days. If you need a 90-day loan lock, your interest rate could be as much as one-third percent higher."
No. 4: Ask about fees. The various fees associated with a loan are one reason you shouldn't comparison shop based only on the advertised rate. Sometimes an advertised rate can be lower than all the rest because it doesn't include the fees associated with it.
"Some lenders blend all their fees into a loan-preparation fee, while others separate them out, so be sure to ask for the total amount it will cost to close the loan," Martucci says.
Generally, a mortgage with higher fees should have a lower interest rate, March says.
If you're refinancing, use HSH.com's Tri-Refi Refinance Calculator to compare your options for paying closing costs. Should you wrap the closings cost into the loan amount, pay them in cash or choose a "no-cost" mortgage?
No. 5: Should you pay points? One of the largest fees by far can be the points attached to a particular loan. Each point is equal to 1% of your loan amount.
"You need to make sure you discuss with each lender how the loan will be structured in terms of whether you are paying points or not," March says.
If you intend to stay in your home for the long term, such as 10 years or more, you may want to pay points to keep your interest rate as low as possible for the life of your loan. If you plan to sell in a few years, paying a lot of cash upfront to pay points may not be worth it, Richards says. A lender can show you the difference in interest and monthly payments in order to decide whether or not it's worth it to pay points.
No. 6: Call lenders on the same day. Mortgage rates fluctuate constantly, so you should call lenders as close to the same time as possible on the same day to compare the best mortgage rates, Martucci says.
"If possible, call within the same time frame, because a bond rally could mean that mortgage rates have dropped dramatically from the morning to the afternoon," he says.
After you organized your financial information and decide which loan is best for you, follow these six steps to make sure you find the best mortgage rate available.
Please beware of those who are self-serving and who will stop at nothing to make money.
The people who were involved in the perpetrations which we suffered are:
*HOMECOMINGS/GMAC - CEO TONY RENZI & HIS ASSOCIATES
*HOMECOMINGS/GMAC REPRESENTATIVE, DAVID KARCHER
*JOHN SOMERS/ADVENTURE MORTGAGE
*STUART GARNER (closing attorney who verified that all was in "proper order")
*HOMECOMINGS/GMAC IN HOUSE ATTORNEYS (who attempted to assert my modification docs had not been received - I have verification of receipt on initial delivery and, also, on second delivery via 'required signature delivery')
*IN AN EFFORT TO KEEP THIS SHORT & TO A POINT I HAVE LIMITED OTHER MAJOR FACTS RELATED TO THIS MATTER.
***INDIVIDUALS*** SHOULD BE HELD RESPONSIBLE - THIS WILL CERTAINLY BE THE ONLY PROPER RECTIFICATION.
Yes - many, many people made money and are no different than Bernie Madoff - lying, coercing, deceit, unlawful actions, etc. etc. EVIL!!!
The home I worked all my life to purchase has been foreclosed upon - a direct result of those perpetrating CRIMES and who are noted above. My health has suffered, my elderly Mother's health has suffered and we are struggling to simply have a roof over our head and food to eat.
This is what I am left with after having been very successful prior to the egregious actions of those named above.