Finding the Best Rates for Your Mortgage
Once you find the rate
you are looking for, submit a loan application and lock in that rate.
Getting the best rates for your mortgage can save you
thousands of dollars over the term of the loan. Whether you do the
research yourself or use a mortgage broker, it pays to shop around. In
There are primarily two ways to find the best rate.
Conducting your own research:
The internet offers a wealth of information. Be informed. There are
several pieces of information that figure into calculating a mortgage
payment. How much of a down payment you can afford, how many points you
will pay, any additional fees such as loan origination or underwriting
fees, settlement costs or closing costs – all of these costs are important
to compare when you’re out shopping for that best rate. These are
questions you should ask of several different mortgage companies. Rates
change frequently. Ask what their rate is, then ask if that’s the best
rate for that day, or that week. Make sure you know if that rate is for an
Adjustable Rate Mortgage (ARM) or for a Fixed Rate Mortgage. Both may be
for a 30 year loan, but the ARM may be a lower rate initially since it is
tied in with a specific financial index, and will vary throughout the life
of the loan. When discussing an ARM, ask your lender what the “cap” is for
one year and for the life of the loan and make sure you can afford the
highest payment within that cap.
A Convertible ARM may be attractive if you only plan on staying in your
home for a short period of time such as less than 7 years. There is a
lower initial interest rate (equaling a lower payment) for a set period of
time, generally 5 or 7 years, then a fixed interest rate for the rest of
the life of the loan. You might want to consider a slightly higher fixed
rate mortgage if you plan on staying in your home a long time. The rate
would stay the same throughout the term of your loan. These are personal
decisions, best answered by you, your budget, and the lifestyle you want.
Using a Broker:
It’s sometimes difficult to know if you’re dealing with a broker or a
mortgage company. Be sure and ask. Brokers do the research for you and
arrange for the transaction - they are not the actual lenders. This can
save a lot of time as you search for the best deal. However, they are not
obligated to find you the best rate unless you enter into a contractual
agreement to have the broker act as your agent.
A broker will have access to a wide array of mortgage lenders and rates,
giving you a wider range of services from which to choose. They are often
paid a fee in the form of additional closing costs, or points. Just as
you shop for mortgage lenders, you should also shop around for a broker.
Some popular Internet sites to begin your search (inclusion in the
list below should not be construed as either an endorsement or a
recommendation):
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copyright © Michael
Feicco 2006
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