How To Properly Research For The Best Mortgage Rate
Are you ready to refinance your home? Or are you looking for the best mortgage rate to close on your new house?

You’ve probably been told to shop around for the best rate, but what exactly does that entail? With some preparation and research, you can save big if you get the right mortgage rate. For example, on a 30-year mortgage for a $300,000 house, a homeowner would pay approximately $1,520 each month at a 4.5 percent rate.

If the homeowner was locked in at a slightly higher rate of 5.10 percent, it would increase the monthly mortgage payments to $1,633, which would make a difference of $40,680 in 30 years. (Figures were calculated on a 20 percent down payment.) That's a lot of money!

The first thing you should do is retrieve your credit scores. Sharing your credit scores with lenders on your own is a better option, rather than having each lender one pull it multiple times, which can ultimately lower your score.

When shopping for a lender, find out if they’re great on service. Get recommendations from family and friends. After you’ve narrowed it down to two or three lenders, compare rates.

One of first things to consider when looking for the best rate is figuring out your limit. Decide on the maximum rate by creating a budget in order to figure out how much you can afford.

The lender should be able to compare loan terms with conventional methods of financing so you can make an informed decision on which loan terms best suits you. You want to jump on the best rate, which mostly involves good timing. The rate lock is a contract with the lender that guarantees you a prevailing interest rate.

You must also agree to buy the loan at that rate within a specific time period, usually in 60 days. If the rate rises, you’re covered. Use a mortgage calculator to compute the monthly payment at different interest rates. If you find a rate that is around or below your limit, lock into that rate at that time or bow out of the game.

When rates do dip below your maximum limit, be as prepared as possible -- clear away any obstacles if they arise so you don’t miss out. Some lenders may offer you the chance to get a lower rate if you’ve already been locked in. This is called a "float down," which means the prevailing rates drop, even after you have secured a lower rate. Be mindful that these specific contracts vary.

Don’t just check out one lender when shopping around for a good mortgage rate. Since interest rates go up and down constantly, different lenders may offer different products. Some may offer the best mortgage rates for homebuyers, but not for those who want to refinance.

It’s best to try a mix of institutions from a direct lender, credit union or a community bank. After deciding on which lender, inquire about fees associated with the loan. A mortgage at a lower rate may end up costing you more because of the fees that add up in the end. Some lenders combine all of their fees into what’s called a loan preparation fee and others separate them out, so it’s important to ask for the total amount it will cost to close out the loan.

Once everything is squared away, decide when you want to close. Discuss your intended target date with the lender and ask about the charges for loan lock periods. You want to lock in the best rate for the right length of time.



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