By Dian Hymer
It's natural to want the lowest possible interest rate on your home mortgage. The lower the interest rate, the lower the monthly mortgage payment. The lower the payment, the easier it is to qualify. The lower the cost of the mortgage, the more house you can afford to buy.
How can you make sure you're getting the best rate possible on your mortgage? Borrowers who have the time to do an exhaustive search on their own may find a deal shopping for a mortgage on the Internet. But, be aware that interest rates are constantly changing. The posted rates may be out of date by the time you submit a loan application. Also, lenders differ regarding when they will commit to giving you a certain rate (called locking in a rate). Interest rates can vary from state-to-state. And, an out-of-state lender might not be able to deliver for you. To check interest rates online, contact: Bank Rate Monitor ( http://www.bankrate.com/ ), E-Loan ( http://www.eloan.com/ ), HomeShark ( http://www.homeshark.com/ ), or Intuit ( http://www.quickenmortgage.com/ ).
Make sure when you compare different loans that you are comparing apples with apples and not apples with oranges. If one 30-year mortgage is a lot cheaper than another, find out why. For example, the interest rate on a 30-year fixed rate loan that is due in 30 years will be higher than the interest rate on a 30-year loan that's due in 7 years. The riskier loan costs less. But, if you're adverse to risk, the lower interest rate loan with a large balloon payment due in 7 years might not even be an option for you.
Likewise, be sure that you get a full disclosure of all the fees associated with getting a mortgage. Generally, there's a trade off between the points (loan fee) you pay to get a mortgage and the interest rate. The more points you pay up-front, the lower the interest rate and vice versa.
Ask about the garbage fees, which are incidental fees that some lenders charge. A recent home buyer was appalled to discover when he signed his closing documents that the lender was charging an extra $712 for such things as a document preparation fee, an underwriting fee and an administration fee. This was in addition to the points, credit report and appraisal fee.
First Time Tip: Borrowers who are too busy to shop for the most competitive mortgage on their own should get a recommendation for an energetic and trustworthy mortgage broker. Ask friends and associates who have bought a home or refinanced recently if they would recommend their mortgage broker.
A good, reputable mortgage broker can save you both time and money. Interest rates can change quickly. One benefit of working with a mortgage broker is that he or she can move you from one loan program to another when changes occur in the finance markets.
Your broker should be flexible and should have good access to the better lenders. You also want to work with a broker who stays on top of what's going on in the finance markets. You may have one lender in mind when you complete your loan application. But, by the time the appraisal and all your supporting documentation is in, market conditions might have changed. You want a mortgage broker who has the flexibility and vision to move you into a better loan program if it becomes available.
The Closing: Don't hold out too long for a lower rate. There's no way to know that rates have hit rock bottom until they're on their way up again.
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