Good home loan rates are obtained only after careful analysis

Getting the good home loan rates: When people set out to get a home loan, that’s usually the  number 1 thing on their list. But how do you find good home loan rates?

By: Hitesh Khan/

good home loan ratesSeveral factors affect your ability to get best mortgage rate. Your credit score, for one. Your down payment, the property you’re buying, the length of the loan, how much you borrow, and even when and where you’re borrowing can all play a role in determining what sort of home loan interest rates you can obtain.

Finding good home loan rates is only one piece of the puzzle when it comes to shopping for a home loan. Other factors, such as closing costs and the type of mortgage, will affect your overall costs as well.

The following are tips on how to get good home loan rates you can, followed by short explanations of the main things that affect the mortgage rate you’ll pay.

Need more information? Just follow the highlighted links to further reading on individual topics that you can explore at your leisure.

Finding good home loan rates

To get the lowest mortgage rates, you need to shop around. Instead of shopping for a home and then applying for a mortgage, try reversing the order – get set up for a mortgage first. With a preapproved mortgage in hand, you’ll be in a much stronger negotiating position with the seller compared to someone who has yet to arrange for financing.

Start off by checking your credit report and score. You want to check your credit report for any errors that might lower your credit score, while your credit score will be an important factor in determining the lowest mortgage rates you can get. Follow the highlighted link for information on ordering your report and correcting errors.

Next, talk with a couple mortgage professionals for some advice on your qualifications and guidance on your mortgage options, including setting a budget for your loan. Find out what sort of mortgage loan rates they’re offering, but don’t make a commitment yet.

Then compare mortgage rates from a number of lenders. Check with a number of different types:  banks, credit cooperatives, mortgage brokers, nonbank lenders, etc.

See who’s offering the combination of the best mortgage rate and terms for a borrower with your credit profile, income and down payment in the loan amount you’re seeking.

Remember that home mortgage rates can change daily and sometimes even several times a day. So it’s important to get all your rate quotes the same day, or better yet within a few hours of each other, so you know you’re making a valid mortgage loan comparison among lenders.

When shopping for a home loan, it’s not enough to merely look for cheap mortgage rates. An unusually low rate can often disguise the fact the loan has other costs built into it that can actually make it more expensive than another loan with a higher rate. One of the most common ways of doing this is through origination fees.

Origination fee, or sometimes called a processing fee, is an upfront fee charged by the bank as a percentage of the loan amount. It is an upfront fee because it usually directly deducted from the loan amount at disbursement.

Loan origination describes the whole process of borrowing from the point where the borrower submits the application forms to the stage where the funds are finally disbursed. Meaning this fee is for the payment of the services rendered to realise the loan.

A useful way to compare competing loan offers is through the annual percentage rate (APR). APR expresses the total cost of a mortgage as an interest rate, and is usually included with any advertisement or offer of a mortgage rate. It’s not 100 percent accurate, particularly if you sell or refinance before the loan is paid off, but it’s a good rule of thumb.

Finding best mortgage rate online

Online lending and mortgage research can make it a lot easier to compare mortgage rates and shop for a home loan. You can quickly obtain quotes from a number of lenders for their latest mortgage rates and sort through them to find the best deals.

Searching online also gives you access to a wider range of lenders. You can do mortgage rate comparisons with lenders who may not have a brick-and-mortar office in your immediate area but still can originate mortgages there.

There are several ways to search for cheap mortgage rates online. You can go directly to the web pages of various lenders and check the best home loan rates they’re offering. They’ll usually have their daily mortgage rates listed. Often, a form will be provided where you can submit information about the type of loan you’re seeking and your credit profile, so you can obtain a rate quote tailored for you personally.

Another way is to use a rate quote service. You submit the information about your credit and the loan you’re seeking, but instead of getting a rate quote from a single lender, you get competing quotes from multiple lenders. This allows you to do a mortgage rate comparison among them and choose the best mortgage rate among them. Always check to see when the information was last updated. If a site isn’t showing today’s mortgage rates, you know it’s outdated and may not be comparable to rates on other sites.

Be mindful that several major factors that affect the best mortgage rate you can obtain.

Written by Ravi Chandran

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