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Tips for Finding Affordable Mortgage Rates
Buying a house is a big deal – that is, for most people, the largest U.S. dollar purchase they will make in their life. Whether you're buying your first house or your fiftieth, it is important when buying a house to get an affordable mortgage rate. The mortgage rate, you could make or buy your home – a great mortgage rate can reduce the amount of money you can spend on a house, therefore reducing the number of houses you can look at procurement. A lower mortgage rate, but may increase the supply of houses you are looking at purchasing, and can help you afford your dream home.
The mortgage rate on your home is determined by the lender who gives you money to buy the house. The mortgage rate for all lenders, based off the prime lending rate, also known as prime rate, and so lenders add their "points." Points are interest rates that lenders add to the prime rate to determine the mortgage rate that they offer you. Some Lenders have much lower lender points than others, which is why it is so important to shop around for a mortgage rate.
When you shop around for low and cheap mortgage rate, you're really shopping for a lender. It is important that you find a lender you can trust – you are working with them for the next one to 25 years, or even longer, depending on your mortgage. Perhaps the best place to start your search for affordable mortgage rates are on the Internet. The Internet has many searchable databases that you can use to compare mortgage rates.
You can find plenty of online lenders who will give you a mortgage rate quote – many of them ask for very little information, while others ask for much more information. Regardless, it is important that you give the same information and as many details as possible over the lenders that you request a mortgage rate quote from. This will ensure you have the best "apples to apples" comparison to make with your mortgage rate quotes.
Mortgage rates are determined not only by the prime lending rate and the lender's points but also on your creditworthiness. The better or higher your credit rating, the better price you will receive. If you have a bad or low credit, you will be faced with higher mortgage rates. But if you ends up with a higher mortgage rate than average, signs only one year on your mortgage – the lending company will probably lower your mortgage rate when you have kept your mortgage in good standing with them for a year.
One of the best places to start your search for an affordable mortgage rate with your regular bank – if you've been banking with them for awhile, and might have or have had any other loan or mortgage with them, they may be willing to offer you a lower and more affordable mortgage rate just to keep your business. Start with your regular bank or lending institution and see what they have to offer you.
The next step is to go to your bank or lending institution's chief competitors. Sometimes this competition can reward you with a much lower mortgage rate – if the competing lenders offer you a lower rate (they can make this land your other business – and may require that you move your everyday banking to their institution), go back to your regular lender or bank and show them the offers you've received – it can be a real pain to move all your banking business to a new bank and your current bank do not want to lose your business, no matter how "great or small" it is. By showing your lender the offers you have received from their competition, they can be able to rework their deals to you and offer you a more affordable mortgage rate.
Once you have determined the lowest possible mortgage rate available to you by standard banks and lenders in your area, it is time to research the less common lenders. Small lenders in your area will probably send the newspaper or billboard Ads that offer amazingly low mortgage rates – it is important to remember that these advertised rates are for "star clientele" who have great credit. If your credit is marred at all, you probably will not qualify for their advertised rate, but you still need to research what rate they will have available for you.
Once you have researched the internet and local lenders and businesses affordable mortgage rates, you should have anywhere from five to 30 quotes to compare. It is important to remember that other options on your mortgage can affect your speed – whether you go to an open or fixed rate and the term of your mortgage. Compare wisely and remember to keep an eye on the seemingly minor differences that may affect the rate you will get.
About the Author
Allan Young is a freelance writer who writes about mortgage rates.