Why You Should Always Compare Mortgage Rates!
The interest on your mortgage could add hundreds or thousands of dollars to your monthly payment. Therefore, it is in your best interest to shop around before choosing a lender and mortgage loan product. What are some of the best reasons to do so?
1) Different Loans Come With Different Rates
The rate that you pay may depend on the type of loan that you are looking for and how long you will take to pay the loan. Generally, a fixed-rate loan has a higher initial interest rate compared to a variable rate loan, but your rate will stay the same throughout the loan. In most cases, loans with a longer repayment term will have a higher interest rate compared to loans with shorter repayment terms.
2) Lenders May Have Different Requirements to Get an Advertised Rate
The rate that a lender advertises isn’t necessarily the rate that you will get. Some lenders may require you to have a credit score over 700 or make at least $50,000 a year to qualify. You won’t know what your actual rate is until you apply, which may make it worthwhile to talk to a variety of lenders.
3) Know That You’re Getting the Lowest Rate on the Market
You can ask a lender to give you a rate estimate or pre-approve you for a rate contingent on further evaluation of your mortgage application. By asking several lenders for their rates, you have a better idea of what the market is for someone of your credit score, income and debt ratios.
4) Give Yourself Leverage When Negotiating Final Loan Terms
Having an idea of what the lowest rates on the market are could give you leverage when negotiating with your preferred lender. If a lender is offering an interest rate of 4 percent, you could push for 3.5 percent if you know the lender across town will approve you at that rate. Typically, a lender would rather keep your business at a slightly lower profit margin than lose your business entirely. In the event that you can’t get your interest rate lowered, you could ask for lower closing costs or price savings elsewhere.
5) It’s Easy to Compare Rates
Perhaps the best reason to compare mortgage rates is because it is so easy to do. All you need to do is go online to a comparison website, input your information and wait for the results. In a matter of seconds, you will see a number of rate quotes that will help guide your home buying process. If you see loan terms that you like, you can call for more information or apply online through your preferred lender.
Getting the best rate on your mortgage can save you a lot of money each month. This cash can be used to pay down other debt or build an emergency fund that will make it easier to pay your mortgage should anything happen. This ensures that you aren’t house poor and can enjoy your new property.
What is a Fixed Rate Mortgage Loan
A fixed rate mortgage loan is one where the interest rate stays the same the entire time you have the loan. That means that if you get a 30-year home loan with a 4 percent interest rate, you will pay that same rate for all 30 years. There are advantages to fixed rate mortgage loans, including having a level mortgage payment that won’t ever change. Also, if you are able to get a fixed rate when mortgage rates are low, you will lock in that rate and save money over the term of your loan if prevailing interest rates rise over time.
What is an Adjustable Rate Mortgage Loan
An adjustable rate mortgage loan is a loan in which the rate can change on a predetermined schedule. Most such loans have a period of time in which the rate stays level, and then it can change after that, usually yearly, depending on prevailing interest rates. For example, if you have a 3/1 adjustable rate mortgage, it means you will have a fixed rate for three years, and then the rate can change yearly after that. Advantages of adjustable rate mortgage loans include getting a low initial rate and the possibility of lowering the rate over time if prevailing rates drop.
What is a FHA Rate Mortgage Loan
People in the market for a new home can consider a FHA rate mortgage loan, a type of loan that’s backed by the Federal Housing Administration. Mortgage lenders receive protection with this type of home loan even if the borrower defaults on the loan.
FHA loans are also beneficial to buyers because they offer more flexible qualification requirements and affordable interest rates, which may be difficult for buyers with poor credit scores and histories or those without prior credit to get FHA rate mortgage loans provide an option for risky borrowers who would otherwise be turned away for their home loans.
What us a VA Rate Mortgage Loan
Military veterans have access to home loans that are backed by the United States Department of Veterans Affairs. These VA loans afford borrowers with lower rates than other types of mortgages, and this loan can help service members with less-than-perfect credit histories to secure a home loan for their house. Another benefit is the ability to get a mortgage with no money down.
VA rate mortgage loan rates are still impacted by the borrower’s credit score, debt ratio, the duration of the loan and the current market conditioners. However, eligible veterans may find VA rate mortgage loans to be more competitive than mortgages directly from their bank.
What does Refinance A Mortgage Mean
When you refinance a mortgage, you replace your existing mortgage with a new one. People usually refinance their mortgage to get a lower interest rate, but other reasons to do so include shortening or lengthening the term of the loan or replacing an adjustable-rate loan with a fixed-rate one. Couples who divorce also must refinance if one spouse will be taking over the full loan. Doing a loan refinance is very similar to getting a loan to purchase a home. You usually need to have an appraisal done, and you will have to pay closing costs on the new loan.
What is a Streamline Refinance Mortgage
A streamline refinance mortgage is a solution for borrowers and home owners who find that their current mortgage isn’t suitable but whose home may have lost value or be underwater.
In a normal refinance situation, a new home appraisal is done and all new paperwork is filled out. This can take months and may mean, if the home has lost value, that a borrower cannot get approved. In a streamline refinance mortgage, the original loan paperwork and appraisal are used by lenders such as the Veteran’s Administration and the Federal Housing Administration, in order to speed up processing and improve approval chances.
What is a Jumbo Mortgage Loan?
A jumbo mortgage loan is a loan that exceeds the limits of a conventional conforming loan. Jumbo loans are associated with luxury housing and are generally granted to those who have a higher income to debt ratio, excellent credit scores, and can provide larger down payments on their purchases. The area in which one is purchasing their home determines their loan limit. As of October 2011, “high cost” areas (major cities) define a jumbo mortgage loan conforming limit at purchases over $625,500. General areas (typically suburban and rural communities) define this limit at a national average of $417,000.