How to Get the Best Interest Rate for YOU

When shopping for a mortgage, it’s easy to focus on the interest rate alone. If you only look at the rate, you might miss hidden fees that make the loan more expensive than expected. Several factors determine the best mortgage and interest rate for each person.

As a homebuyer or homeowner considering refinancing, it’s important to consider the whole loan picture, including how these factors influence each other:

• The time period you plan to own the home
• The loan product
• The loan terms

Time Period: How Long Do You Plan to Own?

Shopping around and talking to different lenders can help you find loan products that match your budget and goals. Buying a home is a significant investment, so you need to ask yourself some questions about your finances and future.

For example, the standard 30-year fixed mortgage might not be the best choice for you, even if it worked for your friend or family member. If you don’t plan on owning the home for more than 5 or 6 years, an adjustable-rate mortgage (ARM) could be a smarter option. ARMs typically offer much lower interest rates, saving you thousands while you live there.

Today’s ARMs are safer and more straightforward than those of the past. If you know you’ll own the home for only a few years, consider an ARM and invest the money you save each month from the lower rate. You could end up much better off compared to sticking with a 30-year fixed loan and higher payments.

It’s important to remember that what’s right for one person may be the wrong choice for another, so carefully assess your personal situation when deciding on a mortgage.

Fees: Beware of Hidden Costs

Don’t be misled by advertised rates! Behind that low rate could be a long list of fees, points, or closing costs. Some of my clients have had a big surprise during the loan process when the lender fees weren’t what they were expecting or had budgeted for. You’ll also need to keep in mind if the seller will be contributing to compensating your buyer agent, or whether you’ll need to cover that cost yourself. Always ask the lender to break down these fees so you know the total cost to close the loan.

• Lock-in penalties: Some lenders may slightly raise your rate if you need to lock in your loan for 60 days or more. Be sure to understand any lock-in requirements before signing paperwork. This is another reason to have your finances and paperwork ready before applying.
• FHA loan fees: Don’t assume FHA loans are cheaper. They include an upfront mortgage insurance premium of 1.75% of the loan amount and an annual recurring cost of up to 1.35%, added to your monthly payments. Review the pros and cons of FHA loans carefully.

Take Advantage of Mortgage Disclosure Forms

Thanks to mortgage disclosure forms, there’s no reason to be surprised by hidden fees. The Loan Estimate (provided three days after applying) and the Closing Disclosure (provided three days before closing) clearly show the loan’s terms and costs. Review them closely, and don’t hesitate to ask your lender questions. If they seem reluctant, that’s a red flag, and you may want to look for another option.

As you can see, many factors go into finding the best mortgage interest rate. Take the time to weigh all the factors and play out different scenarios. And remember, I’m here to help! I can connect you to a trusted lender to help you secure the best interest rate for YOU.