Tuesday, January 15, 2008

How to Get a Good Mortgage Rate

Introduction

The world of mortgages can be confusing! There are so many products available, how do you know if you're getting the best rate possible? Here is an easy-to-follow guide to help you get a good rate on your mortgage.

Instructions

Difficulty: Easy

Things You'll Need

  • Knowledge of your personal financial situation (assets, liabilities)
  • Knowledge of your credit score

Steps

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Step One

Be familiar with your entire personal financial situation. You should know the following information prior to speaking with a mortgage lender to help you get the best mortgage rate:

* How much you can afford to spend each month on your housing payment
* Funds you have available for a down payment and closing costs
* Your credit score
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Step Two

Interview mortgage lenders and present your financial situation. Once they are familiar with your qualifications, they can help direct you towards different products with different rates.
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Step Three

When reviewing available mortgage products, be aware that the lowest rate isn't always the best deal for your personal situation. Be sure to ask your lender for the "total cost" of each loan product over the life of the loan. It can be surprising to see this information, showing that a low rate up front often will cost your tens of thousands of dollar more over the life of your loan.
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Step Four

After examining the total cost of a loan, ask your lender for the total closing costs on each loan. Closing costs are the fees required by a lender to perform the legal process of transferring property ownership to you, the buyer. If a lender says there are "no closing costs," be aware. If you do not pay them up-front, they are rolled-into the costs of the loan and will cost you more in the long run.
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Step Five

If the lender tells you that your credit score is preventing you from receiving a better interest rate on your mortgage, ask how you can improve your score. If you have some flexibility with your purchase time frame, just a few months of paying-down debt can make a huge impact on your score!
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Step Six

Once you've reviewed the total cost for each loan product, the closing costs, and how your credit score is impacting your rates, you can complete the process of choosing the right mortgage. Congratulations! You've gotten a good rate on your mortgage that applies to your personal financial needs!

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