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23
Jul

5 Guidelines When Shopping For The Best Mortgage Rate

When you decide to apply for a loan to buy a home, the steps you take can determine whether you get the best loan package for you. When shopping for a mortgage, you need to start by organising all your financial or credit information so that you can identify the best option. Start by contacting one lender to find out your credit score as there are different score models out there. Sharing information on your credit score with potential lenders is better than leaving it to each one to pull your credit.

1.    Do some groundwork

When shopping for a mortgage, it is important to establish a baseline. It helps to get a referral or recommendation from someone that you trust. Contact the lender to discuss your options and obtain your credit score. The lender can help you to understand the different types of financing available and will help to explain different loan terms. Learning everything that you can about the different loan programs will help you to make an informed decision.

2.    The best mortgage rates

 

 

It is important to know that different financial institutions have different rates and products. The interest rates often fluctuate constantly due to a variety of reasons. If a lender or financial institution is promoting a specific product at a particular time, it can affect the terms and can help to ensure that you get good rates. In a case where the lender is more eager to generate new purchase loans rather than home refinancing, the mortgage rates are more likely to be attractive. A lender can also offer better mortgage rates to attract borrowers to new loan products.

3.    Consider your closing date

When shopping for a mortgage, you need to know your close date as this can affect your purchase decision. Knowing when you are hoping to close will determine your lock-in period and this will have an impact on your mortgage rate. Discuss your intended close date with the lender and find out the charges for the different mortgage-lock periods. Informing the lender about when you expect to close will ensure that you lock in your interest rate for the right duration or length of time.

4.    Find out about loan fees

Make sure that you ask about the different fees that are associated with the mortgage. Most people overlook the fees and they end up paying more than anticipated. Loan fees are a great reason why you should not get a loan based purely on the advertised rate. In many cases, the advertised interest rate appears to be much lower than other options, but this is because the fees associated with the mortgage are not included. As a general rule, a mortgage with high fees should have a lower rate of interest. If you are refinancing, find out the options when it comes to paying the closing costs.

5.    Whether to pay points

Talk to the lender about whether you should pay points. The points attached to specific loans often turn out to be the largest fees amount. Each point can be equivalent to 1% of the total loan amount. You need to discuss with the lender and find out how the mortgage will be structured and whether or not you will be paying points. If you are planning to stay in the home for a long period of over 10 years, it may be wise to pay the points so that you can keep the interest rate low for the duration of the loan.

It is important to know that mortgage rates tend to fluctuate constantly. If you are planning to compare lenders, call the different options on the same day so that you can get an accurate picture. Talk to your lender about your specific needs and remember that if you have decided to invest in a home, timing is everything when it comes to getting financing.

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