Mortgage rates have a significant impact on the overall long-term value of purchasing a home through financing. On one hand mortgage borrowers are looking for lowest rates possible and on the other hand mortgage lenders have to handle the risk through the interest rates they charge.
In order to get the cheapest mortgage rates, borrowers should have solid finances and good credit histories. While the financial health of the borrower decides the rate of interest they are going to get, the government policies and economic factors affect the entire mortgage rate.
Below are some tips for finding the cheapest mortgage:
1) Look for a stable or flexible rate loan: It is always recommended to opt for a fixed rate of loan if you plan to stay in your home for at least a decade and this will fetch you relatively low monthly payments. Also, the fixed rate has two further options
a) 30-year fixed
b) 15-year fixed
Choice of the loan will depend on your need and requirement
The other option is to choose a shorter-term adjustable rate mortgage. These types of mortgages emphasize lower rates for an introductory period, then a higher rate. For example, on a 7/1 ARM, the rate remains fixed for seven years.
2) Do your research: Shop for a mortgage from a variety of lenders, including banks, mortgage brokers, and online originators. The best option is to go to their websites and fill out the preliminary forms to get the estimate of interest rates or calls from company representatives. Also, you might consider calling a lender directly. This will enable you to get pretty accurate estimates.
Before processing all of this, firstly decide what kind of mortgage you want. Because once you start filling the forms and applications, you will be supposed to verify many aspects of your financial and personal life. Therefore it is necessary to determine the type of loan you want.
3) Look for a mortgage broker: A mortgage broker can fetch you better rates than you might on your own and can shop among many lenders. But before dealing with a mortgage broker consider recommendations of your friends and colleagues who have previously worked with that broker and ask them about their experience.
Mortgage brokers are the most desired source to get you best rates and save your money because they have enormous contacts with lenders and can provide you a loan as per your needs and requirements that too at a cheap rate.
4) Consider the CFPB loan estimate: Once you have spoken with a few lenders you might have some attractive rates, so ask each of them to provide you a loan estimate. This is an official document originated by the CFPB to help you distinguish mortgages. You can even utilize it to compare various types of loans, say, a 30-year fixed loan and 10-year ARM.
Try to get maximum loan estimates from most of the lenders. Multiple inquiries on your credit records will not decrease your credit score until they come within a period of 45 days. The CFPB allows you to shop around without damaging your credit score.