From friends and family to coworkers and even the local dry cleaner, the first thing people talk about when they get a new home is their interest rate. Bragging about getting the best mortgage rate on a new mortgage almost seems like a status symbol of sorts. With competition so fierce, how can you be assured you are getting the best mortgage rate?
The first step to getting the best mortgage rate is your credit score. FICO scores are what many mortgage lenders assess as a borrower’s creditworthiness. To get the best rates you need to have a score of 760 or better (on an 850 scale). Your credit score is calculated via credit reports. Therefore check your credit score six months before you want to apply for a loan in order to give you time to improve your credit scores or correct any errors with creditors.
Make sure you are quoted on the same product when comparing what mortgage lenders have to offer. There is no sense getting a quote from lender A for a 30 year FRM only to have lender B convince you that 10/1 interest only loan program would be a better option for you.
There are many types of mortgage programs out there that offer significantly different rates. Fixed rate mortgages offer a fixed interest rate amount that is going to remain the same for the lifetime of the mortgage whether it is 15 or 30 years. In comparison an adjustable rate mortgage allows people to experience significantly less of a financial burden when rates go down. However, with the lower rate comes the risk of feeling the pinch if rates increase. There are also other more creative terms available such as interest only loans.
Before starting the comparison decide on what type of loan program is a right fit for you and move forward from there.
Get a rate quote from someone you can trust. Some lenders will promise a rate only to hit you with points, origination charges, administration fees, commitment fees, as well as processing and underwriting charges. Ask for the lender charges listed in section “800” of the Good Faith estimate. This is where the fees that make up the APR are located. It is in this section where fees such as administration, processing, points, origination fees and more can be found.
Points attached to a loan can be very expensive especially if you plan to stay in your new home for only a short time. However, if you plan to stay in your home for let’s say 10 years or more than you might want to pay the points to keep your interest rate as low as possible. When comparing mortgage rates ask prospective lenders if the loan being discussed includes points.
Rates quoted also depend on the length of time you need them. The more time you need before closing, the more expensive it gets. To ensure you are really comparing lenders equally, get a rate quote from each potential lender for the same time period. For example, a 60 day closing is significantly more expensive than a 15 day lock.
Getting the best mortgage rate seems like the most important goal when applying for a mortgage. However, often it is more beneficial to trade a slightly lower rate for more flexibility. A cheap rate can certainly save you thousands of dollars up front. But that is only if you know for certain you won’t change your mortgage for its term. Otherwise it could cost you thousands after closing.
Aurora, a leading financial services company, has funded billions of dollars in loans across the United States and serves clients nationwide in more than 18 states and jurisdictions. A Direct DE FHA Lender, Aurora provides a broad range of financial products and services, including consumer banking and credit, corporate and investment banking. We have access to some of the best loan products in the industry. Leveraging our size and connections, we’re able to offer you the best rates available
For more information on Aurora Financial, visit www.auroraf.com or call 1-(877) 887-1117.