The best way to ensure you get a reasonable rate on your mortgage is to become an informed buyer. The more you know about mortgages, the more you’ll be able to save, and that doesn’t just mean knowing where to find the best mortgage rate.
While interest rates play an important role in determining the price of your mortgage, there’s always more to a mortgage than just the interest rate. Here are three things you need to know about mortgages to secure a favorable rate.
#1 Understand The Fees Involved
Aside from the mortgage rate, the most significant factor affecting the price of a mortgage is often the fees involved. Unfortunately, these fees won’t always be easy to find, so you might have to do some homework if you want to compare prices charged by different lenders.
Sometimes, it’s possible to have these fees waived or removed. For example, if you move your mortgage from one lender to another, the original lender may have some mortgage pre-payment penalty. You’ll want to make sure your current mortgage loan terms don’t include fees like this before you refinance.
#2 Understand How The “Lock-In” Process Can Affect Your Interest Rate
When you get a quote for a mortgage, each lender will offer a “lock-in period” in which the lender guarantees the interest rate for your mortgage stays the same. Because interest rates fluctuate so often, this “lock-in period” ensures that you pay the same rate you were initially offered should you choose to take out a mortgage with that lender.
If you need a longer lock-in period of two months or more, many lenders will charge a higher interest rate for that provision. For this reason, it’s a good idea to be sure about the closing date of your sale so you can avoid missing out on the lock-in period or being forced to ask for a rate-lock extension.
#3 Understand How Your Credit Score Affects Your Mortgage Rate
Generally, a better credit score means a better mortgage rate, but you mustn’t damage your score while shopping around for mortgages.
Every lender will want to know your credit score and see your credit history. The good news is that every inquiry of the same type (mortgage in this case) will only count as a single inquiry on your score. However, if you have other types of credit pulled, like furniture or auto financing, then too many inquiries into your credit history can lower your credit score. Your best bet is to hold off on any additional funding until your home purchase loan is completed.
Of course, it’s always important to shop around and compare rates when you’re looking for the best mortgage deal. And now that you know these extra pieces of information about how mortgages work, you should have an easier time differentiating between a good mortgage rate and a bad mortgage rate. A mortgage rate that looks good at first could be a bad mortgage rate because of hidden fees and other cost factors.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.