Posts
Pages
Mortgage Interest Rate Shopping
Great Mortgage Interest Rates and 5-Star Service
How to get the best mortgage interest rate
The actual interest rate a mortgage applicant qualifies for depends on several factors: The current market rate, down payment, the applicant’s credit score, the type of loan, the home purpose, and any loan level pricing adjustments by the issuer and lender. A borrower can also buy down the rate, and the market rate can change at any time. That’s why providing an interest rate without a full application is just an estimate, and sometimes not a very good one. The first step in understanding your qualifying interest rate is applying for a loan and speaking to a loan officer about your options. Once you apply, you can compare differences in terms, fees, and interest rates with other lenders using the Loan Estimate they are required to provide. Below is a simple guide to getting the best interest rate.
How to compare mortgages and lenders
Once you complete a loan application, your lender is obligated to provide you with a Loan Estimate, which itemizes the rate and fees associated with the mortgage. This estimate enables you to compare it with other offers. However, it’s crucial to remember that the proposed rate is subject to change unless it is locked, and fees can vary depending on the loan program. Therefore, comparing “apples to apples” requires a bit more effort than simply requesting a rate quote. Here are the four puzzle pieces that collectively determine the cost of a home mortgage.
Puzzle Piece #1 – Loan Type
When it comes to selecting a mortgage loan, you’ll discover numerous options depending on factors such as the desired loan amount, the purpose of the home (owner-occupied, second home, or investment property), and the down payment amount. Moreover, there are specialized loan programs tailored for rural areas, first-time homebuyers, veterans, and properties in need of renovation. Among the most commonly encountered loan programs are FHA, Conventional, Jumbo, USDA, and VA loans. The loan program itself, as well as the loan issuer, can influence the interest rates, terms, and associated fees.
To navigate this multitude of choices effectively, an Intercap lender can assist you in determining the loan type that aligns best with your specific circumstances and the available options. By considering the various pieces that form this mortgage puzzle, along with the appropriate loan type, you can make informed decisions regarding the most suitable loan program for your needs.
Puzzle Piece #2 – Down Payment
Determining the amount you can or should put down is an important decision that can impact your interest rate. According to Fannie Mae, the average down payment for a new home purchase is approximately 8%. Generally, the more you put down, typically up to 25%, the more favorable the interest rate becomes. This is because the home acts as collateral, and a larger down payment reduces the investor’s risk. However, it’s important to consider your budget and financial situation when deciding on a down payment amount, especially when dealing with properties worth several hundred thousand dollars or more. Opting for a down payment of 25% may not be feasible or in your best interest, even if it results in a lower interest rate. Many buyers find it more sensible to pay more towards monthly payments instead of making an excessively large down payment at one time. Ultimately, striking a balance between your budget, available cash, and financial goals is key.
Puzzle Piece #3 – Monthly Loan Payment
Determining how much you can comfortably afford each month is a crucial decision that significantly impacts your mortgage. It involves budgeting and considering your cash flow, while also factoring in your long-term investment strategy. Some buyers may choose to buy down points, which involves making a one-time payment to reduce the interest rate. Others may explore special loan programs designed to keep monthly payments manageable, even if a portion of the funds is allocated towards fees instead of paying down more principal.
It’s important to recognize that home ownership is an appealing long-term investment due to the potential equity it offers. This equity is a combination of appreciation in the property’s value and the reduction of the loan’s principal. Despite the presence of additional fees, the potential for long-term financial gain makes homeownership an attractive option.
By carefully considering your budget, cash flow, and long-term investment goals, you can make informed decisions regarding how much you can afford each month and choose mortgage options that align with your financial strategy.
Puzzle Piece #4 – Closing Costs
The majority of mortgage fees are generally consistent among lenders and their affiliates, such as those associated with title and appraisal services. However, it’s worth noting that there can still be some variations in these fees. To effectively compare fees from one lender to another, reviewing your Loan Estimate is essential. This document provides a detailed breakdown of the fees involved. Additionally, it’s important to consider that closing costs can differ based on the specific loan type. Therefore, when comparing costs, it is crucial to ensure you are comparing similar loan types to make an accurate apples-to-apples assessment. Loan fees can encompass factors like mortgage insurance and options such as purchasing a lower interest rate. By carefully examining these fees and comparing them across lenders, you can make an informed decision that aligns with your financial goals.
Puzzle Master
A skilled mortgage loan officer acts as the puzzle master, adept at fitting together the various pieces to structure the ideal loan for their clients. Since 2008, regulations have been in place to prevent mortgage companies from compensating loan officers differently based on the selected loan type or the fees charged by the lender or investor. These regulations serve to protect homebuyers from unfair pricing practices. In today’s residential mortgage landscape, a competent loan officer is committed to securing the best loan, rate, and terms that align with their clients’ best interests. There is no incentive to overcharge clients, and engaging in such behavior carries significant consequences.
What truly matters is the loan officer’s familiarity with available loan programs and options, the time they invest in understanding their clients’ needs and preferences, and the lender’s ability to efficiently deliver and execute the loan. At Intercap Lending, our loan officers have the freedom to work with any mortgage lender or broker, yet they choose to work at Intercap Lending due to the advantages we offer in navigating the intricacies of the entire mortgage puzzle.
Intercap provides access to numerous loan programs, maintains essential relationships with key investors, and possesses direct lender relationships with Fannie Mae, Freddie Mac, and Ginnie Mae. As a result, Intercap has the capacity to underwrite most loans internally, ensuring more efficient execution. With our expertise and resources, we strive to deliver the best possible outcomes for our clients throughout the mortgage process.
Intercap Lending has been a private mortgage lender since 1972 and as you may have noted from our reviews, our loan officers maintain a 4.9 star rating from Zillow, Google My Business, Facebook, and other third-party review sites. Read through our reviews and you will notice that client satisfaction is based on rate and all these puzzle pieces.
And when timing counts with mortgage lending, which it always does, our turn times are something to brag about (half the time of the industry average). Read our reviews HERE and we’ll let our clients do the talking.
