I do not know why, but when mortgage interest rates go down; the ugliness in the mortgage business seems to come out. What I mean by this is that mortgage loan officers seem to promise the cheapest mortgage rates and fees, and interest rate shoppers get ultra concerned about an extra $15 in closing costs. Being on the phone talking to mortgage rate shoppers for many years, I have heard just about every reason to go with my loan quote and just about every reason to not go with my loan quote. It is quite comical.
What Do I Need To Know To Get A Mortgage?
Most of us seem to think that it is getting the lowest interest rate – this makes sense right? It is like our interest rate on our home is somehow tied to our ego or what kind of person we are. I imagine folks standing around the barbeque at the neighborhood picnic shooting off at the mouth about my mortgage interest rate being the lowest. Okay, enough of my cynicism let us get on with the point of this article: is there such a thing as the best mortgage interest rate?
Well, for starters, the answer is an emphatic NO! There literally 100’s if not 1000’s of mortgage companies out there quoting rates every day. It is physically impossible for you to call every one of them to find the lowest rate. But let us take the case that you do in fact have the ability to call 1000 mortgage companies to get the lowest rate. Do you really know if you have gotten the lowest rate quote from the one company that gave you the best rate on that day? Sorry to say this to you, but you do not. Think about it this way, did every mortgage loan officer you spoke to ask you exactly the same questions, did you say the exact same things to each person? Chances are you did not have the exact same conversation will everyone. With just this slight variation, can you see that whatever the quote they gave is based on the information you gave them? If you left something out of one conversation and put it in with someone else you would get completely different quotes.
For your information, here are a few other factors that go into an interest rate loan quote: your credit score, the amount of money you are borrowing compared to the value of your home (sales price if you are purchasing), the loan amount, are you a W-2 employee or self employed, can you prove your income, what is your credit history, have you had a recent bankruptcy or a foreclosure, are you a first time home buyer, do you have established credit, how much money do you have for a down payment, what kind of loan do you want – fixed rate – interest only – adjustable rate – buy down, are you paying a pre payment penalty with the interest rate you are quoted, are there any origination fees or mortgage broker fees or loan discount fees, is there a co borrower buying the home with you who will not be living in the home, do you want to pay PMI or LPMI or get a second mortgage, do you want a “no cost mortgage”, how long are you going to keep the mortgage.
You can see, it is not just a casual conversation to find out “what are the best rates”.
Another thing to know about rates – you might know this already – they change every day. Sometimes they change 3-4 times a day depending on what is happening in the financial world. It is literally impossible to compare rates from one day to the next. The best interest rate one day is not going to be the best rate the next day. Nor is one company who has the “cheapest mortgage rates” one day going to have them the next day. No lender that I get my interest rates from has the best rates every day. Some days their rates are great and some days they are not so great.
Tips For a Good Mortgage
Well, at this point you might be thinking, if I am not shopping for rate, what am I shopping for? What you want to look for in a mortgage quote is the costs of the loan (will the loan officer provide you with a Good Faith Estimate or a breakdown of the costs of your loan?). Make sure ask if there are any origination or loan discount fees. Does the loan officer seem knowledgeable about what loan programs you can fit into? Ask questions about the different types of loan programs and why they think you should pick one over the other (do you like their answer?). Does their company claim to be the best or have the best rates and fees? If so, make sure you compare their rates and fees with another company (get at least 3 quotes). Do you like who you are talking to? Do they do what they say they are going to do?
With all this in mind you should be able to get a mortgage that works for you as well as getting the rates and terms that are competitive. Good luck!