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Resources For Finding The Lowest Mortgage Rates
By Brian Jenkins
The total amount you will pay for your home depends heavily on the interest rate you are offered. While it may not seem like there is a big difference between a few percentage points, even tenths of percentage points can equal hundreds or thousands of dollars when you are making such a large purchase. Of course, you will want to find the lowest interest rate possible, while not compromising much on other mortgage agreement characteristics. But how can you find the lowest mortgage rate? Here are some resources you can use: (continued below)
Resources For Finding The Lowest Mortgage Rates
Working through your Real Estate Agent
Although you can certainly go out and find a home on your own, most people choose to work with a real estate agent. These agents have insider knowledge about the homes for sale in your area and can negotiate the best selling price for you with the sellers real estate agent. It makes sense to have a real estate agent when youre purchasing a home, in most cases.
Your real estate agents can also be a valuable resource for finding a mortgage with the lowest interest rate. More real estate agents have working relationships with lenders in the area, and they can recommend lenders to you (and vice versa). The lower your interest rate, the more you can afford to spend on a home and, in turn, the more you spend on a home, the higher your real estate agents commission will be. So, it makes sense for them to help you find a low interest rate. Of course, keep in mind that they may be getting a commission for recommending you to certain lenders, so their recommendations arent always the best choice. They are just a starting point as you are in the process of looking for a mortgage lender.
Good Faith Estimates
When you have determined that you want a home, you should contact a number of banks and other mortgage lenders in your area and ask for a good faith estimate. Without doing much research on you, the bank will provide the index they use to calculate interest rates, and the probable interest rate youd receive through them, based on information you provide (like your credit score and monthly income). Good faith estimates are not set in stone, but as the name implies, they are as close of a guess as possible so that you can choose a lender and actually get approved for an amount to spend and interest rate.
Shopping for your Interest Rate Online
Dont forget to use the Internet as a way to research interest rates. In most cases, it makes sense to work with a mortgage lender who lives in your community, so that you can ask questions whenever you have a problem and they understand you unique needs. However, mortgage lenders are found across the country and many are more than happy to give you a loan, even if you live thousands of miles away. Use search engines to compare the good faith estimates you find online with those that you get from local lenders. Remember, however, that you should not go through credit checks and other underwriting processes with every lender youre considering. These will show up as hard inquiries on your credit history report and actually hurt your credit score.
Lease or Rent to Own Options
Sometimes, the best interest rate option is the one offered by the seller. While you can apply for mortgages, occasionally, you will find lease-to own (also called rent-to-own) options or seller financing options. With these options, youll pay a monthly amount to the person selling the home. Owners offer this option when they need to sell quickly or when they dont need the money from the sale to immediately pay for a new property.
With lease/rent-to-own, youll pay rent with a certain percentage going toward a down payment every month. At the end of the set amount of time, youll have the option to purchase the property or you can move on to another home, though youll lose all of the money as if you would have just been paying rent. With seller financing, youll likely need a down payment like you do with a mortgage lender, and then youll make monthly payments directly to the seller. In both cases, make sure you have a strong contract that specifies who owns the house until the full amount is paid, what happens if you cant make monthly payments, and what rights both you and the seller have in regards to the property.
Finding the lowest interest rate can be hard work, but the lower your rate, the less youll pay over time. Even just a few tenths of a percentage point can make a huge difference overall.
About The Author
Brian Jenkins is a freelance writer who writes about mortgages and home ownership, offering tips such as how to find the lowest mortgage rates.