Shopping For The Best Mortgage Rate
Shopping for a house is fun. Shopping for mortgage rarely is. But it is a necessity that inevitably needs to be done. A mortgage loan is an essential part of buying a house as most of us will need the financial assistance to acquire our very own property. With various lending companies out there offering various types of financial assistance and seemingly good deals, you might find the task of selecting a mortgage rate that you can afford quite daunting and confusing. Trying to understand the concept of indices and margins does have the effect of making people feel somewhat dazed and overwhelmed.
If you are applying for a fixed-rate mortgage, you do not really have to worry much about the rate because this figure stays the same all throughout the loan life. But there are still ways for you to find the mortgage rate that you are comfortable with even for a fixed-rate mortgage. So if you dont think you can afford to take the risk with an adjustable-rate mortgage, there is nothing wrong with getting a fixed-rate mortgage. But to be sure that you are getting the rate that you deserve, you need to check into a few things.
First, you need to run your own credit check. Put yourself in the shoes of your lenders and you will agree that you probably would be less likely to lend money to people with bad credit records and high chances of not paying back the money they owe you. Check your own credit rating by accessing your very own credit report and check for errors. If you want to be more thorough, you can buy the information of your own credit history and exact credit score from FICO (Fair Isaac Corporation). Basically if you have excellent credit score, your lenders will give you better interest rate due to the fact that you belong to the low-risk category. On the other hand, if your credit score is low, lenders tend to charge you with a higher interest rate.
Another factor you have to consider when shopping for the best mortgage rate for home purchase is the structure of your loan. Understand the different terminology and what it entails such as:
1. Principal
A principal is the amount of money you borrow without the interest. The principal is usually the last thing you pay off in your loan as the first year usually consists of paying off the interest.
2. Interest
Lenders basically charge interests based on your capabilities of paying them back. This is where you credit score comes in. For most people, the higher the interest rate is, the lesser amount of money they can actually borrow.
3. Taxes & Insurance
Government taxes and insurance are usually included in the monthly payment that you make to your lenders and held in escrow until the payment is due.
You should also think about saving up for a large down payment in order to get a good rate. The more money you put in your down payment, the less money you have to pay later on with interest. Not only that, lenders usually will charge you a low interest rate when you pay a large sum of down payment. So why dont you start setting aside a certain amount of money every month to see if you could do without it? Once you do that, you will get to have a feel of what it is like to be paying for your mortgage every month. Another benefit is that you will already have some money to pay for your down payment. Go big and pay more for your down payment and save a lot during the rest of your pay back period.
Getting the best mortgage rate needs not just a thorough research but also a good planning on your part. Other than reviewing your own credit report, it is also advisable for you to plan an on-time monthly payment program of your own to establish good rapport with your lenders. Once they see that you are serious about making payments on time and that you have a feasible plan to actually carry out your plan, there is a chance that they will charge you a lower interest rate.
One word of advice, do not be easily cornered into signing up for deals that you do not really understand. Sometimes lenders might offer you a no-cost loan. Ideally that means that they are only charging you interest with no administration cost or fee. But most of the time, the fees will be incorporated in the monthly payment that you have to make so you will probably end up spending more money than necessary. So ask your lenders to be upfront about all fees that you have to pay and disclose all the hidden charges.
The task of researching the best mortgages might be a little tedious and exhausting. But it is better for you to take all precautions necessary and do a little bit of extra research that will help you save money in the long run and avoid having to pay more than you actually could.
by: Ask Bill
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