Finding the Best Mortgage Rate
Author: John Published Under: Business
When taking out a mortgage on a home or refinancing a home, there are many important factors, such as finding the right lender or choosing a home that is in the right location, but one of the most important factors is the interest rate of the mortgage. It is the interest rate that determines not only what you will pay each month, but how much of each payment goes towards the actual cost of the home(principal) and how much goes towards the interest.
If you spend anytime reading the paper or surfing online, you are certain to see a rather large fluctuation of interest rates. In the same paper, you might find one that is 4.5%, one that is 6% and one that is 7%. This can be very confusing and it is important to remember several things about posted interest rates, primarily that they are constantly changing. Interest rates literally can change by the minute and even second, so even if the lender was trying to be accurate, there is no way you could realistically expect them to.
Factors that Affect Mortgage Rates
There are many factors that affect mortgage rates and often these are things that are not obviously tied to the practice of money lending. For instance, things like unemployment, factory orders, shipping orders, and even retail spending can all influence an interest rate. Interest Rates are also affected by the rate set by the FED, as well as government programs, such as the First time homebuyers tax credit
Since there are so many things that can change the way that the interest rate is calculated, it is important to be paying attention to economic indicators and spend some time considering how the interest rate charges after one of these events.
Finding the Best Interest Rate
Buying a home or refinancing your existing mortgage can be a very tiresome and stressful process. It might be easy to simply jump at the first offer and not spend any time researching it, but ultimately this is a very risky decision. Instead, just like an important financial decision it is important to spend some time exploring your options. In terms of finding the best interest rate, this means finding the lender that will best fit your needs.
However, it is important to realize that a) many of the people you will talk to only get paid when you use their service and b) because of this conflict of interest, they may be willing to make a little less if it means convincing you to use their service. To this end, it is not uncommon for the agent to call you up a few days later and give you a slightly better offer, while saying something to the effect of "You have to lock this in right now."
When you get this type of sales pitch, you should be instantly wary and never accept right away.
Is there a Time When I Should Call to Get my Rates?
There is no set time where interest rates will be changed or updated and in fact this happens many times throughout the day. However, often by calling after 11:00 am, you get the new updated rate, where if you call in the evening, you are effectively getting the previous days rates.
However, whenever you call, it is important to speak to each lender as close together as possible. For example, if you call and speak to one loan broker in the morning and another in the evening, it is very likely that the interest rate offered at the first company will have changed.
Can I Lock in My Interest Rate? Should I Lock in My Interest Rate?
The short answer is yes you can lock in an interest rate and sometimes this is a good idea. However, sometimes it is also will work against you.
It is important to remember that when you receive a quote over the phone, it is not guaranteed. Sometimes the broker will simply give you a low-ball interest rate, making a guess at where the interest rate may go or what you would like to hear. The interest rate offered is also based upon good credit, so after a credit report, you may not qualify for these terms.
There is no set way that lock-ins are offered and this can vary company to company. Usually, however, most will require that an application is completed and that the credit of the person is run, after which, they may decide to lock in a given interest rate for a period of time. However, even having a lock-in does not necessarily guarantee that the loan will go through.
The main advantage to a lock-in is that you can reasonably be sure that you will be able to take advantage of the offered interest rate. However, this can also work against you if the interest rates lowered, because depending on the terms of the lock-in the company may be under no obligation to lower the interest rates. Also, if they require the application fees up front, you may end up financially tied to a loan that isn't in your best interests.
Since a lock-in has both advantages and disadvantages, it is important to only accept a lock-in when you are sure of the company, sure of the terms, and sure of the interest rate.
A Word of Caution
While an interest rate is a very important component of a mortgage, selecting the right mortgage lender is also very important. This is especially true of a person's first mortgage, as many times lenders will be a little more hesitant to offer a loan to a person with little credit. For this reason, it is essential to determine whether or not he lender is a subprime lender or a predatory lender, before selecting a mortgage.