Common Mistake while Shopping for Best Mortgage Rates
When people are in the process of refinancing or buying a new home, a prevalent mistake they make is getting a quote from different lenders on different days. For example, if you are getting a quote from lender A on Monday and Lender B on a Wednesday, this would end up in inaccurate comparison as the mortgage rates fluctuate daily.
It could be possible that lender A gave you a rate when the rates were high on Monday and lender B gave you the rate when the rates were low on Wednesday.
Know Your Scenario
It is critical to understand your scenario – are you buying a home? or refinancing your current mortgage? or getting a cash-out refinance? These scenarios affect the mortgage rates that you can get. You also need to know your actual credit score
P.S: We would suggest not to consider the credit scores which are provided online as they have been proved of being inaccurate. What we would suggest instead is to start off with one lender or talk to a couple of lenders, see who you like the most and have one of them pull your credit.
Property Type
The next thing you need to know is your property type. Pricing for rates is different for different property types. You want to make sure you give this information to the loan officers that you are talking to and get more accurate interest rates for your mortgage.
You want to make sure you provide consistent information to each loan officer you speak to for better comparison. You also need to know if it is a purchase, how much are of a down payment are you putting down? And if it is a refinance, how much is the property worth? When the loan officer is looking at this information, they are more likely to get the best option based on your scenario.
Shopping Time Frame For Best Mortgage Rate
It is also crucial that you shop for the interest rates within a specific time frame. Try and shop for the rates from different lenders within a two-hour window for better comparison. The loan rates are tied to the financial market, and the financial market is constantly changing, and they could be very volatile.
On the most volatile day, we could see 4 to 5 changes in the rates. So if a lender is giving you a rate in the morning on such days, the same lender could end up giving a different rate by the evening. When you shop for the rate within two-hour, it will provide you with the best snapshot of which lender is giving you the best interest rate.
If you are comparing the rate from ‘Monday’ to ‘Tuesday’ that would be an inaccurate comparison because you are comparing past data to current.
Fees and Points
The next important thing you need to ask the lenders is what are the fees involved in the loan. And if they are charging any points for the rates which are quoted to you. All lenders have origination fees, and you want to know what these are for all the lenders that you are working with.
The origination fees can vary dramatically varying. So you want to make sure you get this number because it is a critical piece of the financial picture. You also want to ask if they are quoting points. Many lenders may quote you with the lowest interest.
However, the catch could be that they are covering the difference in points. Hence you need to ask the lenders upfront about points to make an accurate comparison.
Pitfalls To Avoid
The major pitfalls are the mailers. Do not believe everything that you receive in the mail. If you still think that the mailer you received is something you might want to consider at least get in touch with the lender to check if they are providing what is being promised in the mailer. Similarly, if you walk to a bank and see the rates on the daily mark board, it could be different for you.
Conclusion
Comparing for best mortgage rates could be a task. But if you do it right, you could save lots of money and might not have to worry about mortgage-related breakdowns. Taking the right steps initially while comparing can make sure you have a financial relief for the life of the loan!
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