May 30th, 2016 6:58 AM by Jackie A. Graves, President
Did you know you can call two different lenders to apply for a
mortgage, and each may give you a different interest rate? Even though
information like your credit score and salary is set, financial institutions
can interpret this information differently. And that can mean scoring a lower
interest rate — or getting stuck with a higher rate — merely because of your choice of
But more than half of borrowers don’t comparison shop before
selecting a lender to finance that new Los Angeles, CA, real estate purchase. Just as you shop around for
the perfect sofa, car, or birthday present for your significant other,
considering multiple options for a mortgage is equally important. It can give
you the opportunity to save big over time, since a lower interest rate equals
less money paid toward your mortgage each month, (and more money staying in
your bank account or being spent on furnishings!).
first step to securing a great mortgage rate is finding the right lender.
Research your options by following the steps below, then ask these questions to
ensure you’re making an informed decision.
Have numbers in mind before you call
You should do a little legwork before you approach any lenders.
Have a general sense of what a competitive
interest rate is and
what your monthly payment might be around that rate. This will help you ask
more informed questions when talking to lenders about applying for a mortgage.
Here are a few
mortgage calculators to
try out so you can get a ballpark of the numbers you’ll work with:
Start with a comprehensive
mortgage calculator to
get a feel for what you may pay each month based on the price of the home
you’re looking to buy and the term of the loan.
Compare different mortgage term
lengths to see how the
length of the loan changes how much you pay in interest.
Get an idea of how your closing costs could impact
your interest rate.
Get a quote on interest rates
An interest rate is one of the biggest variables for mortgage
loans (you can’t really change the house value or the amount you can afford to
put down). While your credit score plays a big part in determining what a
lender will offer, specific brokers and banks may be able to get
you a better deal than others. Once you narrow down your choices to
a handful, ask for quotes on interest rates from all these lenders within a
seven-day period and compare your options.
tip: When you
get a quote, it generates a hard inquiry on your credit report. Racking up
multiple hard inquiries can
ding your credit score, but if all the inquiries are generated
closely together, they’ll count as a single inquiry on your report. So try to
do your mortgage research within a short time frame — like one week.
Three questions to ask a
In addition to getting quotes, plan to run a series
of important questions past
lenders to better understand how you can get the best rate. Here are the
three questions you need to ask lenders before locking in your mortgage
1. Are points included in the
quote? A quote with an interest
rate from your lender may or may not include points. Points are fees paid to
the lender when you close on a home in exchange for a lower interest rate. Make
sure you fully understand the point system and the benefits of using points or
forgoing them, and ask any questions to clarify. You can also do some research
ahead of time to determine
whether paying points makes sense for you.
2. Will the size of my down
payment impact the interest rate or fees on the loan? If you put down less than 20% when you apply for a mortgage and
buy a home, you’ll likely have to pay private
mortgage insurance. Be sure to understand the minimum down payment
and how it can affect the rest of your fees.
3. How can I lock in the interest
rate, and how long does that lock last? When you get quotes for mortgage interest rates, you also need to
ask how you can lock in that quoted rate. If you wait too long between getting
the quote and actually applying for the mortgage, the rate the lender quoted
may expire. By locking in a rate, you’ll get what you budgeted for and can
avoid having to ask for another quote with a potentially higher rate. But
locking in a rate isn’t permanent (there’s usually an expiration
date), so be sure to ask how long the lender will honor your rate once you lock
Remember, a mortgage loan isn’t something standard across all
banks or brokers. It’s well worth it to do some digging and research. Come
prepared with a list of questions to secure the best interest rate, so you can
save the most money possible over the life of your home loan.
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