Items You Should Ask About Up Front
There are multiple items that can help you determine if a loan product is right for you. By asking your LO about these things, and lining up their answers with the answers from other loan sources, you can compare across the board and see who really has the best mortgage loan offer:
- What is the base interest rate without points for my situation?
- What points are offered and what are the terms?
- What additional fees are charged?
- Are any of these fees negotiable?
- Do you have lender credit options to reduce my costs?
- What is the estimated total for closing costs?
- What type of down payment is required?
- Will my loan require private mortgage insurance ?
- Can I lock my rate?
- How long between finding a home to buy and my closing date?
- How can I get preapproved?
It is also highly recommended that you work with a lender that is transparent with the rates they have available online. Can you check the current rate through their website? If not, why and what are they hiding? Technology these days is readily available for mortgage companies to provide custom pricing for consumers without the need for Loan Officer involvement. The only question is why some lenders make it difficult to see what rates they offer.
This is especially important when purchasing a new home. Most of the time you wont have a property selected when you start the preapproval process, which means you cant lock a rate.
The Impact A Good Mortgage Rate Can Have
Your mortgage rate is the interest you pay on your remaining loan balance. Its expressed as a percentage, and if its fixed, it will never change. Adjustable mortgage rates are fixed for a limited amount of time, perhaps 3-10 years, and then typically reset every year after the introductory period.
The longer your mortgages repayment period, the more interest youll pay overall. For a traditional 30-year mortgage, you could end up paying over 50% of what you initially borrowed just in interest. Heres what youd pay in interest for a $150,000 30-year mortgage at 3.3% and 4.3%, according to NextAdvisors mortgage calculator.
Shopping Around For Your Mortgage
All the savvy in the world wont help you if youre not working with professional, experienced Loan Officers who are motivated to help you find the best loan product possible.
Pure online lenders can be a good option for a savvy borrower as they often provide competitive rates and fees however, its important to be confident with your contact and know who will assist you if issues come up during the transaction. The last thing you want is to have an urgent matter that needs to be addressed, only to get stuck with a general customer support number staffed by inexperienced personnel as your only lifeline.
When you use your local bank, you can also end up with a staff member who is in over their head probably because they do a few home loans a month lumped in with all of their other responsibilities.
When you shop for your mortgage through a dedicated mortgage bank, you get a Loan Officer who is dedicated to helping you navigate the process from start to finish and beyond. Choosing a mortgage bank that has helpful online tools and technology can make the loan process easier without sacrificing advice from a knowledgeable and experienced Loan Officer.
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Buying A Home 15 Ways To Shop For The Lowest Mortgage Rates
When purchasing a home, shopping for the lowest mortgage rates is an essential strategy that can save you thousands of dollars over the life of the loan.
For the best results, shop with a plan. Do enough upfront research to have an idea of what you want, then see who can get it for you.
Here are some strategies to shop for, and qualify for, the best mortgage rates:
Getting Many Mortgage Preapprovals
You might decide to shop around for a mortgage after preapproval for a number of reasons. Maybe the initial lender that provided preapproval has changed the interest rate, making the loan more expensive, or a real estate agent suggests that you apply with their preferred lender for a second opinion. Getting rate and cost quotes from at least two lenders can save you money, but getting as many as five quotes can give you a clear picture of who will provide the best service and pricing. When comparing loan offers, consider not only interest rates, but also the type of loan, points and other fees, such as origination and processing.
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What To Do If Your Credit Score Isnt High Enough
If you do discover that your credit score is not what youd like it to be, you may want to delay your purchase. Borrowing a lot of money at a less-than-optimal interest rate will mean that your monthly mortgage payment will be higher, and youll end up paying a lot more to own your house in the long run.
You can take steps to improve your score, like paying down debt and increasing your credit limits. Read about sneaky ways to improve your credit score here.
Theres also the possibility that youll find an error on your credit report thats dragging your score down. If that happens, it is possible to have it corrected. Heres how.
Errors should take 30 days to correct once you inform the bureau and creditor of the mistake. But sometimes the process can take up to three or four months. Thats why you should pull your credit scores and reportsat least four to six months before youre ready to apply for a mortgage.
Clark says the next thing to do after youve done a background check on your credit is to monitor your credit and scores. This is to ensure that your credit score holds steady or improves as you get closer to applying for a loan. Team Clark recommends using the free services at , or both to keep an eye on your score.
Today’s Mortgage Rates On Jan 18 202: Rates Creep Higher Again
A number of mortgage rates keep climbing to higher levels, including 15-year fixed and 30-year fixed mortgage rates. We’ve also seen a rise in the average rate of 5/1 adjustable-rate mortgages. Mortgage rates have been quite low over the last period during the pandemic, making it a good time for prospective homebuyers to lock in a fixed rate. But rates are dynamic and are projected to continue going up. Before you buy a house, remember to consider your personal needs and financial situation, and speak with multiple lenders to find the best one for you.
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What Are Todays Mortgage Rates
On Thursday, December 23, 2021, according to Bankrates latest survey of the nations largest mortgage lenders, the average 30-year fixed mortgage rate is 3.190% with an APR of 3.350%. The average 15-year fixed mortgage rate is 2.500% with an APR of 2.710%. The average 5/1 adjustable-rate mortgage rate is 2.740% with an APR of 4.070%.
Calculate How Much House You Can Afford
Before you get your sights set on your dream home, make sure you can afford it.
Estimate how much house you can afford to buy by using the 28/36 rule. This refers to your debt-to-income ratio, or the total amount of your gross monthly income thats allocated to paying debt each month. For example, a 50% DTI means you spend half of your monthly pre-tax income on debt repayment.
Ideally, your front-end DTI, which includes only your mortgage-related expenses, should be below 28%. Your back-end ratio, which includes the mortgage and all other debt obligations, should be no more than 43%, though under 36% is ideal.
If your DTI is too high, youll need to work on reducing or eliminating some existing debt before you apply for a home loan.
And remember, your monthly loan payment is just one piece of the puzzletheres also interest, homeowners insurance, property taxes and, potentially, homeowners association fees. Youll also need to consider how much of a down payment you can contribute, and whether youll be required to pay private mortgage insurance .
There are also plenty of online calculators that can help you run the numbers.
Tips For Finding The Best Mortgage Lenders
Before buying a home, shop around for the best mortgage lenders. Get tips on finding the right lender for you, and see our top picks for a variety of needs.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.
NOTE:Due to the coronavirus outbreak, obtaining a mortgage may be a bit of a challenge. Lenders are dealing with demand and staffing issues. If you canât pay your current home loan, refer to our mortgage assistance resource. For the latest information on how to cope with financial stress during this emergency, see NerdWalletâs financial guide to COVID-19.
When you buy a home, youâre in it for the long haul. Youâll have a mortgage payment for 15, 20 or 30 years, so itâs smart to shop around to find the best mortgage lenders out there.
How to look for a lenderFinding a mortgage lender involves more than just getting a good interest rate you want to work with the best mortgage companies, staffed by professionals who will guide you through the process.
Below are five tips to help you hunt for the best mortgage lender.
Get your credit score in shape. The higher your , the more bargaining power youâll have.
Know the mortgage lending landscape. We’ve done some of the homework for you below.
Look At Smaller Players
In addition to considering a mortgage from the big banks and online lenders, research smaller, lower-profile players such as credit unions and community banks.
Search online with the name of your home state and terms like community bank mortgage, s& l mortgage, and credit union mortgage. We found lots of options this way.
Keith Gumbinger, vice president of HSH.com, a mortgage information website based in Riverdale, N.J., says these smaller lenders typically have better rates for ARMs and offer better terms and rates to people with variable income streams, like the self-employed.
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Cardinal Financial Company: Best For Low
Cardinal Financial Company, which also does business as Sebonic Financial, is a national mortgage lender that offers both an in-person and online experience and a wide variety of loan products.
Strengths: Borrowers have a range of options with Cardinal Financial, with the lender able to accept credit scores as low as 620 for a conventional loan, 660 for a jumbo loan, 580 for an FHA or USDA loan and 550 for a VA loan. The lender also offers speedy preapprovals, and some borrowers have been able to close in as little as seven days .
Weaknesses: Cardinal Financials current mortgage rates and fees arent listed publicly on its website, so youll need to consult with a loan officer for specifics pertaining to your situation.
> > Read Bankrate’s full Cardinal Financial Company review
Locking In An Interest Rate
When you are offered an interest rate, you have the option of locking it in. Mortgage interest rates fluctuate all the time based on larger market conditions. A mortgage rate lock holds that rate steady, typically for a period of 30, 45 or 60 days.
Clark says the decision about when to lock in your rate should be based on whether youre buying new construction or an existing home.
If youre buying a home thats being built, you never want to apply and lock in too early because builders schedules are notorious for running late, Clark says. You have to be sure almost everything is done by the builder before you lock in your rate when youre buying new construction.
The decision about when to lock in your mortgage interest rate is a little different when youre buying an existing home.
Rate lock strategy has everything to do with understanding current markets that affect mortgage rates and the buyers risk tolerance, Downs says. Some buyers recognize they have a great rate and want the peace of mind of locking it in and moving on with life. Some buyers are hyper-sensitive to locking in the absolute best rate, which is perfectly understandable, but floating your rate comes with risks.
In general, Downs, says, rates increase quickly and decrease slowly.
Timing a rate lock is like playing poker. Seek advice from your lender to make an informed decision about when to lock in your rate, he says.
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Use Your Mortgage Quotes To Negotiate
Keep in mind that the mortgage quotes you get are not set in stone. Mortgage lenders have the flexibility to adjust their fees and even their interest rates. That means you can often use competing offers as leverage to negotiate your costs.
Dont hesitate to play one lender off against another:
I like your company, but Ive got a quote here with a lower rate or less expensive closing costs. Can you match it? Better yet, can you beat it?
Chances are, these negotiations wont lower your rate by much. But, when youre borrowing huge amounts over decades, even a tiny drop in your rate can add up to hundreds or even thousands. And what do you have to lose?
Get Your Paperwork Together
Your finances are in good shape and you know how much you can borrow. Now here comes the real work.
Lenders require quite a bit of documentation as part of the mortgage approval process, so its a good idea to gather everything up before youre ready to apply. Heres what youll need:
Income verification. First, youll need to prove you have the income to support your mortgage payment. Lenders will likely want to see tax returns for the last two years, as well as recent W-2 forms or pay stubs. If youre self-employed, youll need to verify your income with 1099s or profit and loss statements from the past couple of years instead.
If you receive income from alimony or child support, youll also be expected to provide court orders, bank statements and legal documentation that shows youll continue receiving that income.
Proof of assets. In addition to income, additional assets can help you secure a mortgage. Expect to provide bank statements for checking and savings accounts, retirement accounts and other brokerage accounts from the past 60 days.
List of liabilities. Lenders may also ask you to provide documentation related to outstanding debts, such as credit card balances, student loans or any existing home loans.
Additional paperwork. Depending on the lender, you may have to come up with some additional documentation. For example, if you currently rent, the lender might want to see canceled rent checks or a letter from your lender as proof that you pay on time.
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What Is A Mortgage Point
Some lenders may use the word “points” to refer to any upfront fee that is calculated as a percentage of your loan amount. Point is a term that mortgage lenders have used for many years and while some points may lower your interest rate, not all points impact your rate. Mortgage points can be found on the Loan Estimate that the lender provides after you apply for a mortgage.
Review Your Credit Report
Lenders will also review your credit reports, which are documents that capture the details of your credit history. Many consumers have a credit report with each of the three major credit bureaus.
Your credit report includes a list of credit accounts opened in your name, such as credit cards and student loans, plus the following:
- Payment history
- Whether the account is in good standing
Lenders use the information in your credit report to:
- Find your monthly financial obligations, which impacts your debt-to-income ratio
- Look for signs of loan delinquency, such as missed payments
- Check for red flags, such as bankruptcy or foreclosure
So, before applying for a mortgage, check your credit reports and dispute any mistakes. You can pull your credit reports for free once a year at AnnualCreditReport.com.
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Whats A Good Mortgage Rate
Mortgage rates are incredibly low right now around 3% on average. If you can secure a fixed mortgage near or below 3%, thats a great rate by historical standards.
For perspective, the longtime average for 30year fixed mortgage rates is about 8%. Thats the average since Freddie Macs records began in 1971.
But keep in mind that not everyone gets the same rates.
The best mortgage rates are reserved for toptier borrowers. Those are people with:
- Stellar credit scores
- Spotless credit reports
- Low debttoincome ratio
- Plenty of assets and savings
- A big down payment
Of course, few borrowers are perfect. Most of us fall somewhere on the spectrum between excellent and so/so personal finances.
Where you are on that spectrum will determine the mortgage rates you qualify for. But knowing how to shop for a mortgage will help you make sure your deal is at the better end of that range.
Mortgage Rates: What The Experts Are Saying
With mortgage rates so low, most experts agree the only direction to go is up. The question now: how fast will it happen?
Experts have been saying all year that mortgage rates will continue ticking upwards through the end of 2021. News of the Omicron COVID-19 variant has created fresh economic uncertainty and is putting upward pressure on rates. At the same time, rates are getting downward pressure due to the highest inflation in nearly 40 years. The result is volatility. For example, since November 10th, rates have followed this up and down pattern each week: 3.15% 3.22% 3.24% 3.2% 3.24% and most recently 3.28%.
While experts still expect rates to increase as the economy recovers, the recent volatility could continue through the end of the year and into 2022. Most experts believe increases would be incremental. Were not expecting an overnight shoot up where all of a sudden mortgage rates are at 3.5% or 4%, says Ali Wolf, chief economist at Zonda, a California-based housing data and consultancy firm.
Despite the ups and downs, todays mortgage rates are still close to 1% lower than pre-pandemic levels. So, if you are in the market to refinance or purchase a home, now is a good time to take action. Here is everything you need to know about scoring the best rate and how much it can save you.
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