Mortgage Rate Know-How
So you’re buying a home, or you’re refinancing your
current one. I bet I can guess what is on your mind. A bunch of
numbers and a major headache, right? Well, it doesn’t have
to be that way. It is a hassle getting a mortgage, and there are
some calculations that must be done in order to get the right
mortgage at the right rate. But if you follow some basic steps,
the process is so much easier.
First, don’t stress. Just research the mortgage rates in
general, rather than going crazy over memorizing every possible
lender and what mortgages and rates are offered with each. Lenders
vary, products and payment plans vary, and interest rates—of
So the best way to know you are getting the right mortgage is
to get an overall idea of what the interest rates are right now,
decide what type of loan you want, and then choose a few lenders
you trust from which to pick.
A good place to find the mortgage rate trends are in Wall Street
stocks and bonds, and/or in the state of the economy. Since investors
are the main source of mortgage money, Wall Street is bound to
give somewhat telling predictions of what the mortgage market
will be doing. The economy may be a little more abstract, but
the overall, economic news generally hints at the coming mortgage
market trends as well.
To find a good mortgage rate you have to know more than the rates.
One essential tool in mortgage quoting is called the Annual Percentage
Rate, or APR. This is the cost of the mortgage expressed as a
percentage, or the annual interest of the loan. So, a five percent
APR means you pay five percent of the loan amount per year, in
addition to paying off the loan amount. This is crucial to choosing
a mortgage lender because it shows you how their rates compare
to other lenders in the market. It may be hard to dissect a figure
that includes all kinds of fees and future interest increases,
but by knowing the APR, you have an idea of what you will be paying
throughout the loan and you can contrast that to other lenders’
Meeting with a lender is so important in the mortgage shopping
process! You cannot just look at the numbers, pick a loan and
make a phone call to purchase. This is not like buying a new sweater,
where you have one in mind that you like and you can order it
online or at the closest department store! You need to sit down
with a lender and have a consultation, so a professional can tell
you how much you can afford and what kind of mortgage you need.
When you are ready, you can go through the pre-qualification process
in order to then go onto purchasing a mortgage.
Finally, lock in your rate. This is like a promise that the lender
makes to keep your interest rate the same during the processing
or commitment period, which is the period of time it takes to
close the mortgage.