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Mortgage Rates
A Quick Guide to Finding the Best Home Loan Interest Rate
There are 3 main factors that will ultimately determine the mortgage rates quoted to you.
- Amount of down payment (the higher, the better)
- Your credit score (the higher, the better)
- The gap between earnings and personal debt (the larger the gap, the better)
Quick Tips:
Check for rates from different online sources and create a comparison chart for all the lenders you would consider. Always use the APR as your baseline so you’re comparing apples to apples.
Follow the 10-year bond market to predict whether interest rates will move up or down. When the yield moves up, mortgage rates usually do as well. The same is true vice versa.
Use a loan calculator tool for a good estimate of your expected monthly payment. Just enter the amount you want to borrow, and the interest rate provided by the lenders from whom you received quotes.
Sign up for email alerts that offer real-time updates on lending interest rates.
Check with a newspaper source for a regular report of current interest rates.
Lender Negotiation Tips:
Ask the prospective lender about their origination fees. 1% is fairly standard but you can always negotiate it down. If their fee is higher than 1%, request that it be lowered or find a lender with a better overall mortgage rate program.
When reviewing mortgage loan programs, make sure your lender is willing and able to quickly respond to a good program by locking in a rate for 30-60 days.
Special Note: Make sure the locked rate allows you to receive the lower of whichever interest rate is available should rates fall once the lock takes effect.
If rates fall dramatically and you don’t have the above mentioned clause providing for the lower rate in a lock situation, be prepared to fight the lender on this point. It will require negotiating but the lender who wants your business will be willing to work something out in your favor.
Important Considerations:
Protect your deal in case your lender suddenly goes out of business. If this happens after you’ve already been approved and locked in a rate, first call the lender and ask if they will honor the loan and still fund your purchase. If not, find out if the loan program was transferred to a new lender who will honor the same terms. When all else fails, contact the home seller and see about delaying close of escrow so that you may find a new lender. Unless the seller has good back-up offers in the wings, he should be inclined to work with you since you previously already qualified for a loan.
When planning to make a home purchase or refinance, delay applying for any new credit cards as this can lower your credit score and affect the interest rate you will be quoted.
Be sure to shop around for the best mortgage rates. You can apply with multiple mortgage lenders within a 45-day period and have the inquiries count only as one where the credit reporting bureaus are concerned.
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