Tips for Getting the Best Mortgage
Rate
by Brandon Cornett
As a home buyer, it only makes sense
to try and obtain the lowest interest
rate when applying for a mortgage.
After all, that rate is a primary
component of the mortgage payment,
so it has a direct bearing on the
amount of money you'll pay each month.
But how do you get a low rate when
applying for a home loan? This is
the question many home buyers want
to know. So in this article, I'll
explain three important concepts
you should keep in mind when seeking
the best rates from mortgage lenders.
Concept #1 - Your Credit Score
Plays a Role
The first thing to realize is that
the interest rate you are offered
will be partly determined by your
credit score and financial history.
In other words, the best mortgage
terms are usually reserved for those
home buyers with the best credit
scores.
What does this mean to you when
buying a home and applying for a
loan? It means that your credit score
will often dictate the type of interest
rates you are offered. So if you
have a bad credit history, and your
score illustrates this to the lender,
then there's little chance you'll
be getting the best interest rate.
If this is the case, you should focus
on improving your credit score before
you go shopping for a mortgage online.
Concept #2 - The Mortgage Type
Makes a Difference
The type of home loan you select
also plays a role in determining
the interest rate you receive. So
it's important for home buyers to
understand this concept as well.
For example, an adjustable rate mortgage
(ARM) loan will generally come with
a lower interest rate than a fixed-rate
loan -- but that is only for the
first few years. Of course, the rate
on an ARM loan will also adjust at
some predetermined point in the future,
and typically this adjustment means
a higher interest rate! That's another
thing to keep in mind when mortgage
shopping.
Concept #3 - You Must Compare
Lenders on Key Factors
There is one last thing I want to
touch on, and that is the need to
shop around in order to get the most
favorable rates from a lender. Shopping
for a loan is just like shopping
for anything else -- you have to
compare multiple lenders in order
to find one that offers the best
rates and terms on the loan.
Many buyers don't realize that ten
different lenders may offer you ten
slightly different mortgages. The
interest rate will vary, the terms
will vary, the closings costs will
vary ... you get the idea. And these
make a big difference in the amount
of money you pay over the long haul.
That is why it's so important to
compare lenders and to carefully
review the information they present
to you, ideally with a financial
advisor of some kind (or at least
someone who is mortgage-savvy).
About the Author: Brandon
Cornett publishes a blog about home
loan refinance as well as several
other real estate websites. Visit
the author online at http://www.mortgage-refinance-advice.com/blog/