Whether you are buying a new home or refinancing an existing mortgage on the one you have got, the process can be confusing. You want to make sure that you get the best interest rate for houses out there. ARMs, fixed rates, interest only and points and closing costs are just a few of the terms you will hear when discussing mortgage rates with a lender. When you shop rates, be sure you compare apples to apples.
Do your home work, so to speak, and familiarize yourself with the basic mortgage rate structures before you do any shopping. You need to understand the difference between a fixed rate mortgage and an adjustable rate mortgage, otherwise known as an ARM. There are many websites available with glossaries to help you understand basic terminology, and they also explain how these loans work.
First, compare interest rates for houses online. There are many sites you can visit to shop and compare. Some, like Lendingtree.com, will give you rate quotes from several lenders at one time. This will save you the time of having to visit each site individually. Just be prepared to get called almost immediately after inputting any of your contact information.
Next, contact a local mortgage lender for rate quotes, as well, starting with your own bank. You start here because you have a relationship with them and they like to keep their customers happy. They can often give their existing customers the best rates depending on those relationships.
Besides, if there is ever a problem, you already have a name and a face to contact to resolve the problem. It can be nice to have that personal touch every now and then.
Keep all of your details of your comparison shopping in a list on your phone or other mobile device so they are handy at a moment's notice when you need to refer back to them. If you get quotes for ARM's, make note of the term. For example, note whether it's a 3/1 ARM or a 7/1 ARM. The two will have very different rates during the fixed rate period. They may also have different margins when the adjustable rate portion of the loan kicks in.
Ask about the fees you will be required to pay, any possible points, and closing costs. It may sound like you have been offered a good rate but then come to discover, in order to get that rate, there is a higher minimum loan amount or points involved. Points are finance charges you pay up front in order to lower your rate going in. Unless you plan to keep your mortgage for at least 10 years, you could get the raw end of the deal if you have to pay any points.
Make sure to only do business with the bank you know or reputable mortgage lenders to get the best interest rates for houses and avoid no name brokers. Their only concern is to get you on their books in order to sell your mortgage to someone else, and nothing in their process is in your best interest. |