As my 13 year old niece puts it: "Whatever!". There is no such thing as the Best Lowest Interest Rate. I hate to break it to you if you are shopping for the best interest rate but it is impossible to get the best rate by shopping just rates. What you need to shop for is the right mortgage lender, or mortgage loan officer for you. You shop for the right lender by shopping and comparing fees on their Good Faith Estimate and techinically speaking their Truth In Lending Act (TILA) statement.
Shopping For The Lowest Rate A Mistake - The Bait And Switch Loan Quote
Shopping for the best mortgage interest rate for many home buyers and home owners is often a path to the old "bait and switch" sale pitch.
The bait and switch in the mortgage industry is a case where a rate shopping mortgage applicant is quoted a low interest rate and maybe a low fee quote to get the rate shopper to move forward with a mortgage lender only to find out later that they didn't get the rate, or fees, that they wanted and were quoted due to some "story" about why they didn't qualify for the better rate and lower fees.
Often then the change in rate and even loan program is an effort by the loan officer to make more money while covering up the fact that they weren't truthful from the beginning with the potential mortgage applicant.
Additionally, the change in rates comes at a point in the loan when it almost too late to change to a new mortgage lender. This would be the case when there is a pending sales date for a purchase transaction and near the end of the month and the mortgage payment hasn't been made for that month.
Rate Shopping When Rates Change Without Notice - Is Your Rate Locked?
Another vital piece to understanding that rate shopping is not the best way to get a mortgage is to know that mortgage interest rates change daily, if not hourly from day to day and within the same day. The worst rate change day that I have seen is where rates changed 4 times in one day. Can you imagine trying to rate shop on a day like that?
The bad thing about rates changing so often is that many consumers don't know that they change and get caught with not being able to get a rate that they were expecting because the quoted rate was not locked, or that it was never explained to them by the loan officer that rates can and do change without notice.
Instead Of Rate Shopping Discuss These Items - Then Pick Your Loan Officer
To get the best mortgage program and lowest home loan interest rate a loan officer must consider at least the following:
- Occupancy Status, is this an investment property, or a primary residence?
- Residency Status (U.S. native or Legal Alien etc.)
- Assets available
- Asset Seasoning
- Are you getting a gift for down payment and closing costs?
- Are there Co-borrowers, will they live in the property?
- What Is Your Debt To Income Ratio?
- What is your housing ratio?
- Are you making improvements to the home with your mortgage?
- Are you employed?
- How are you paid? Salary, Sales Commission, Bonus, Over time, etc.
- What is your employment history? Do you have any gaps?
- What kind of loan do you want? ARM or Fixed Rate Mortgage?
- What is your loan size?
- What is your Loan To Value? Home's value compared to the loan amount
- What are your credit scores?
- Are you going to escrow taxes and insurance? Do you need an Escrow Waiver?
- When is your closing date? What kind of lock period do you need?
- What kind of property do you have? A single family house, or a multi family?
- What is your credit history?
- Are you getting cash out with your refinance?
- Are you getting seller contributions - what percent of the sales price?
- Do you want a pre-payment penalty?
- Do you want to pay points or not?
- Do you want a no closing cost loan?
How To Get The Best Mortgage Interest Rate?
So instead of rate shopping, it is best to go fee, program and personality shopping.
Ask each loan officer for a good faith estimate to show the fees and costs of getting a loan with them. Make sure that you discuss the same things with each loan officer that you speak with so that you can compare the good faith estimates that each give you.
If you have questions, make sure that you ask questions. Listen to what the loan officer says. Are they addressing your questions or dodging your questions? Listen to your gut. If you get off the phone and your ear is dripping with "grease and slim" then you probably don't want to do business with that individual.
If what the loan officer sounds too good to be true, then it is probably too good to be true. Get a second opinion, maybe a third and fourth.
Pick your loan officer based on comparing their fees and by how they answer your questions and the information they give you about the mortgage process. For additional suggestions about picking the right loan officer for you please visit: What Questions to Ask When Shopping For A Loan Officer
For help with picking the right real estate agent visit: I Want To Hire A Real Estate Agent - What Do I Ask Them?
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