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. You need to know three things 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 ensure 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 initially offered should you take out a mortgage with that lender.
If you need a more extended lock-in period of two months, 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 having 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 preventing any damage to your credit score while shopping around for a mortgage is essential.
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. It is best to hold off on additional funding until your home purchase loan is complete.
Of course, shopping around and comparing rates is always essential when looking for the best mortgage deal. A mortgage rate that looks good initially could be bad because of hidden fees and other cost factors.
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. To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.
Updated on August 10, 2022