Are you thinking about refinancing or buying a new home? If you are, chances are you would like to get the best mortgage rate in the market. In fact, if you prepare yourself well you could end up saving lots of dollars in the long run. Since you are in the market shopping for a mortgage, it is possible you have been advised to shop around until you find the best rates. You might be willing to search but you might not know where to begin.
First things first
The first thing you need to do is approach a lender to receive your credit rating. Mortgage experts usually advise that rather than have every lender pull your credit score, share it with all of them; multiple inquires about your credit history ends up improving the scores. Since there are various models of credit scores, the one you might be looking at as a consumer might be very different from the one a lender might be looking at. This is why you should always approach a lender for your score.
As a borrower, you need to answer a number of questions before you are provided with an accurate quote of the mortgage rate by the lender. Firstly, how big is your down payment? This is important since interest rates are affected by value to loan ratio. What kind of house are you buying? Condominium or family home? Any borrower buying a condo with a 75 percent loan to value ratio pays a little more interest rate by a quarter percentage point. Are you buying or refinancing? The rate of interest is usually higher if you are refinancing, more so for those taking out money.
Planning for the best mortgage rates
Start by requesting a referral from an individual you know and talk to the lender recommended to you, not only to discuss the loan options available, but also the credit scores. The same lender is capable of helping a borrower to compare conventional financing, different loan terms and FHA (Federal Housing Administration) to be in a better position to make the right decision on the loan terms and programs. This ensures you are well informed before approaching other lenders.
Approach different financial institutions
You can contact more than one financial institution. This is due to constant interest rates fluctuations for various reasons such as the consistent promotion of a certain loan facility by a lender. For instance, a financial institution might want to bring about lots of purchase loans and thus offer great mortgage rates to those who intend to buy a home. It is however bad news for those looking for refinancing. Banks and credit unions are known to introduce new loan packages and thus offer homebuyers the best mortgage rates to entice them.
This is why trying as many financial institutions and diversifying is important. Utilize institutions such as national banks, community banks, credit unions, regional banks and direct lenders.
Know your close date
To get great mortgage rates, know when it is best to close. Let the lender know when you will be ready to close since the lock-in period has a huge impact on the mortgage rate. Ask the lender for the charges on various loan-lock phases as you discuss the date you intend to close.