Tips to Getting the Best Mortgage Rates

MortgageForm&HouseIf you are in the market for a new home, or you are a current homeowner who wants to refinance, finding the best interest rate is likely the number one item on your list of priorities.  Since mortgage rates are at all-time lows, now is definitely the time to score the best deals. To make sure you get the best rate on your mortgage or refinance, follow these tips below.

Shop Around for the Best Rate

With rates at an all time low, the difference from lender to lender is not going to be big.  But even small differences can add up in the end.  It’s important to look at the rate down to an eighth of a point.  For example, for a $300,000, 30-year fixed rate mortgage, the difference between a 3.75 percent loan and 3.90 percent loan adds up to almost ten thousand dollars in interest payments over the life of the mortgage.  Wouldn’t you rather put that money to better use by upgrading a feature of your home, such as installing hardwood floors or new appliances?

Known the Costs and Fees

Everyone knows that interest is a cost incurred with a home loan.  But most loans also carry other fees and costs.  Here’s a breakdown of what you need to know:

  • Application Fee – covers processing and credit check, median cost is $365.
  • Loan Origination Fee – covers attorney fees, notary fees, and documentation fees, among others.  Median cost is between $2,500 and $2,700, depending on the amount of your down payment.
  • Appraisal Fee – covers cost of professional appraiser, median cost is $292.
  • Points – these are one time fees that reduce the rate of your loan.  One point is one percent of your loan’s amount.  These fees are generally between 0 and 3 percent of the loan amount.
  • Home Inspection Fee – your lender may require a home inspection, generally costing between $300 and $500.
  • Private Mortgage Insurance (PMI)  – if your down payment is less than 20 percent your lender will probably require mortgage insurance, generally costing between $50 to $100 a month.

Honesty is the Best Policy

Lenient lending practices are a thing of the past.  Expect more paperwork, and for your lender to verify everything you submit.  Be honest about your finances.  Even if you have some trouble spots, your mortgage professional is there to help you.

Be Vigilant with Your Credit Score

Your credit score is the number one most important thing to a lender, determining not only if you qualify for a loan, but also what interest rate you get.  A credit score of at least 720 is best.  You could see a difference of up to 1.5 percent or more on your interest rate depending on your FICO score.  Over time, that money definitely adds up.

Put Big Money Down

Make the biggest down payment you can.  You’ll start out with more equity, and you’ll avoid purchasing Private Mortgage Insurance, outlined above.  That can potentially save you between $50 and $100 a month.



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