Shopping For A Mortgage Loan Is MORE Than Just Interest Rate
The largest financial decision of our lives, for most of us, is buying a home and obtaining a mortgage loan. How should someone really go about making such an important decision? For most, it starts with calling several mortgage lenders and asking "What is your rate"? But there’s something you should know about shopping for mortgage rates.
Here's the secret: The interest rate you are quoted as you are shopping cannot possibly be 100% accurate until more information about you (and possibly your co-borrower) is acquired.
There is such a myriad of influencing factors that influence your rate, such as:
- Your credit score, and credit score of your co-borrower (if there is one)
- The type of program (USDA, FHA, Convential, VA, Bond program, etc.
- The size of your down payment
- The length of your mortgage term (i.e. 30 year, 20 year, 15 year, etc.)
- If the rate is fixed or adjustable
- How far off you want to "lock" your loan. (You have to close on your new home before the lock expires.)
- Discount points
- If the home is a primary residence, second home, or investment property
- Even the time of day! (Rates vary day-to-day, and even intra-daily, as the market dictates.)
So how SHOULD you shop around?
- For starters you should research reputable companies that have been around for a while. They didn't get that way by doing the wrong things for their clients.
- Service First Mortgage has been around since 1997.
- Next, look at reviews and testimonials on Facebook, Google, Yelp, and similar websites.
- Make sure you talk with your mortgage expert and that they have a clear understanding of your short and long terms goals. For example, if you know you are only going to live in a home for the next 3-5 years then a lower rate won't benefit you as much as lower entry costs because you likely won't realize the benefit of a lower rate until the 10th year, or so.
- In the same spirit as above, make sure your mortgage expert explains the different loan options to you. While you might want to put 20% down to avoid private mortgage insurance (PMI), or go for a Conventional loan instead of an FHA loan to avoid life-time mortgage insurance premiums (MIP), the lower down payment offered by an FHA loan could be a better choice if you are only in the home short term.
- Get an actual, official Loan Estimate from each lender you are considering, as long as you are in the application phase of the process. This will help you get more of an "apples-to-apples" comparison.
BOTTOM LINE: Research companies and their reviews, talk with the mortgage experts to make sure they understand your goals and have a plan to help you achieve them, and go with the best company that offers the best program and the best price. Don't just shoot for the lowest rate. It may cost you more in the long run.
If you have any more questions about rates, programs, or want to discuss which loan options help you reach your long term and/or short term goals, please do not hesitate to reach out to me for a 100% no-cost consultation. I look forward to serving you with your home loan needs.