- October 18, 2017
- Posted by: steve
- Category: mortgage news
While you’re looking at houses, you imagine how you’ll decorate and arrange your furniture. You imagine cooking dinner, watching movies, and putting your kids to bed.
But do you start thinking about how you’ll finance your new home?
Deciding on a budget for your home is one of the first steps in the home buying process. What can you actually afford?
But you’re not going to pay the entire price up front. You’ll need a mortgage to get your dream house.
Today, we’ll get into how you can find the lowest mortgage rates while you’re looking at houses. Your low-interest rate will mean you can use your money for something better, like a vacation.
Let’s get into it!
What to Know First
Before you start shopping around for a mortgage rate, you need to prepare yourself with some information. Take a break from looking at houses and think about these factors:
Type of Loan
Choose which type of loan you want. If you don’t want to choose yet, consider your top few options.
Two of the major, basic types are fixed and adjustable-rate mortgages.
Fixed-rate mortgages maintain one interest rate over the life of the loan. Adjustable-rate mortgages keep the same rate for an introductory period, and then the rate fluctuates.
Adjustable-rate mortgages start off with a lower rate, but you must keep in mind that it could rise in the future.
That means you should stay away from adjustable-rates if the low, introductory rate is near the top of your budget already.
How much will you pay down on the loan? This is some of the only money you’ll pay on the house that won’t accrue any interest, so make it count.
Some lenders will accept as low as 5%, but most want at least 10%. You should try to pay 20% down for the lowest interest rates, though.
Knowing your credit score is vital if you want to search for rates without giving your personal information to an institution. Basically, if you don’t want a full quote and just want quick rates while looking at houses, you need to know this.
Discover cards let you see your credit score for free, or your bank might be able to tell you. You can also pay to see it online.
If you have no idea, apply for one quote to get a baseline of what you’re working with. That institution should access your credit report for a quote, so they can tell you your score.
Do what you can to improve your score for better rates. A score of 740 or higher usually provides the lowest mortgage rates.
Of course, improving your credit score takes time. But there are small things you can do, like paying off your credit card balances.
Price of the Home
Before you start looking at houses, you should have your budget in mind.
You should wait to seriously move forward with mortgage quotes when you have one property in mind. You might, however, want to start considering rates while you’re still shopping around.
In that case, search rates at your ideal price while looking at houses.
Points or No Points
A point is a fee you can pay to reduce the interest rate by a fixed amount. You should do some calculations before you decide whether or not to do this.
Usually, a point lowers an interest rate by 0.125%. Calculate how much this will save you in interest over the number of years you plan to stay in the house.
Compare those savings to the fee you’d have to pay to get it. If the fee is more than the savings, it’s a no-go.
Do you want a mortgage for 15 years or 30 years? Choosing the length of the loan decides how much your house will cost you.
15-year loans can offer lower interest rates than a 30-year loan. The monthly payments are higher, though.
With a 30-year mortgage, you’ll pay more in interest over the life of the loan. But, you’ll have a lower monthly payment.
Some people like a shorter loan because the house belongs to them sooner. Plus, who doesn’t like saving money on interest?
Others need the 30-year mortgage because, though they’re paying more money in the long term, a lower monthly payment fits into a tighter budget.
Take a look at your financial situation and decide which makes more sense.
Comparing Interest Rates While Looking at Houses
Once you have the information above, you can start looking for the lowest interest rates. The key here is to keep that information the same in each search to compare rates with accuracy.
Here are some resources you can use to start gathering rates to compare:
If you want a convenient way to compare many rates at once, several websites exist to help you do so.
Those websites let you compare the rates of every lender in their data base, specific to your area. These include online lenders, mortgage brokers, and even some banks in your area.
You can even enter advanced information, like whether or not you’re a first-time buyer, to alert you of the rates most relevant to you. The benefit of these is that you don’t have to enter any personal information to see rates.
The rate you see, however, might not be exactly what you’re quoted when you provide an institution with personal information.
Call around to banks and ask what their mortgage rates are that day. They may or may not ask for personal information, but you’ll get a more accurate quote if they do.
Banks notoriously offer some of the highest mortgage rates out there, especially the big ones. If you’ve been a loyal, long-term customer in good standing, they might have a good rate for you.
Credit unions provide much lower rates than banks. They’re not for-profit organizations, so they don’t have to skim profit off of your interest.
The people giving you mortgage terms there also don’t have to please a boss or a board of trustees. They’re there to please you, the customer.
Mortgage brokers shop around to find the best interest rates for you. They aren’t actually the people lending you the money–they connect you to the people who do.
That means they’re not incentivized by a high-interest rate, either. They need to connect you to a mortgage you’ll be happy with to make anything from the companies.
Mortgage brokers, like us, also have a relationship with local lenders. They provide us with better rates for our clients because we bring them business.
Brokers also do nothing but coordinate mortgages all day. That means they give it more care and attention than an employee at a bank who has a bunch of other responsibilities.
Once you get all of these rates, you need to compare them properly.
Make sure you don’t only pick the lowest rate and call it done. There could be other fees and figures to that loan that make it more expensive than one with a slightly higher rate.
Calculate out what the loan will cost over its life to find the true lowest.
There are a few other tips and tricks to finding low-interest rates than simply searching them up. Two great ones we mentioned earlier are improving your credit score and paying a bigger down payment.
Find rates to compare on the same day. National mortgage rates change by the day, so the same institution might give you a different rate today and tomorrow.
By that standard, your comparison of today’s rates and tomorrow’s rate won’t be accurate.
Limit your search to 14 days to protect your credit score. If you inquire about credit for a long period of time, it can damage your credit score by making you look like a risk.
Try to choose a mortgage under two weeks after you start searching if you’re providing your information for a quote. If you’re looking at listings on websites that don’t require any personal information, that’s okay.
Keep your information consistent. The comparison of a 15-year loan rate to a 30-year loan rate isn’t fair, either.
When you’re looking at houses, ask for recommendations of mortgage brokers the realtor may know.
Attending open houses offers a nice opportunity to chat with other buyers and listing agents in the area. They might have valuable recommendations or personal connections.
Dream House at a Dream Price
Like your job and your marriage, finding a good interest rate will take some work on your part. You’ll need to get some information together on your end and shop around to find the best deal.
Unlike an awkward match maker, a mortgage broker works to successfully match you to your dream mortgage rate. You should only worry about looking at houses and imagining your new life.
If you’re looking for a mortgage, check out our mortgage application options.
Contact us with any mortgage-related questions. We would love to help match you with a low, local interest rate!