Getting The Best Home Mortgage Interest Rate
We may appear to be putting the cart before the horse here but bear us out and you will see what good sense this information makes.
Start looking for a good interest rate before you actually have a property in mind for purchase. Nothing prevents you from contacting prospective lenders before there is a specific property on the block. The advantage to this strategy is that you will know, before you set your sights on a specific neighborhood or house, exactly what type of interest rate you are eligible for, and you then avoid any disappointments or delays
Although the best interest rate may not necessarily offer you the best overall mortgage every time, it should be a premium consideration on your part, especially if you happen to be a first time home buyer. You will need to factor in the length of the prospective mortgage, as well as your budget, and weigh all the factors equally before you settle on any one particular loan and the rates associated with it.
Note: Mortgage brokers, although they are for the most part honest
and ethical professionals, have a responsibility to themselves and their
employers to close loans that benefit them as much as possible without
crossing the lines of proper conduct. You are the only one who can safeguard
your interests and determine what is right and affordable for you.
To insure that you will be getting the best interest rates available to you, do your due diligence and research, educate yourself to the current situation. Check that your credit report reflects an accurate picture of your credit history, because if it does not, you may be considered a higher risk than you really are, and ultimately you will pay higher rates for this discrepancy.
Your debt-to-income ratio is also very important at this point in the process. If your monthly income is more than sufficient to accommodate your current debt service, plus your prospective new mortgage, you are in a great position to request lower interest rates of your lender.
Shop around for rates; you can do this before you make application. Like anything else the market is flexible, and each lender will perceive you, your credit history and your ability to satisfy the loan agreement differently.
The actual loan amount will have a lot of bearing on the interest rate that you eventually get offered. Loans that are shorter than the typical thirty years amortization plans offered, substantial down payments that are above twenty percent of the value of the prospective home, and being able to afford the closing costs outright, will all help to bring down your interest rate.
If you are financing through Fannie Mae or Freddie Mac, the conforming loan limits that they have established, and which are updated annually, also have bearing on your loan and the interest you will be asked to pay. While you are doing your research make sure that you know, and understand, what the loan limits are relative to these two agencies.
Note: "Par" is the term the mortgage industry uses in
reference to a loan with the best rate available to you without your having
to pay points. Although they will most certainly not tell you how much
you are paying above Par you can usually find this information within
the good faith estimate you will receive from them. It will usually be
there under the abbreviation YSP. If it is not evident on the GFE look
at the HUD-1 statement and the full amount paid to the broker will be
included within it.
So be sure to ask what the Par rate is and then ask why, if so, your
quoted rate is higher. One sure way to pre-empt a higher rate quote is to
ask the lender to confirm to you, in writing, that they are going to offer
you the rock bottom rate without you having to contribute points at the
closing that are an additional expense that you will have to shoulder.
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