Whether you have good or bad credit, shopping around for a mortgage or home loan will help you to get the best mortgage interest rates. You will want to compare all the costs
associated with obtaining a mortgage loan. Comparing, shopping, and negotiating can save you a amount in the thousands of dollars.
Mortgage loans are available from several types of lenders such as thrift institutions, mortgage companies, commercial banks and credit unions. Different lenders may quote you different prices and interest rates, so you should contact several lenders to make sure you are getting the best deal.
Mortgage loans are also available through a mortgage broker. Rather than lending money directly, brokers arrange transactions. This means they find a lender for you. A broker's connection to several lenders can help assist you by offering a wider selection of loan products and terms from which you can choose from. These mortgage brokers will contact several different lenders regarding your loan application. If you plan on using a mortgage broker, you should contact more than one broker, because different mortgage brokers deal with different lenders. This will help to ensure you get the best possible terms and interest rates
Determining whether you are dealing directly with a lender or a mortgage broker may not always be clear. Some financial institutions operate as both lenders and brokers. This is why it is important to ask your loan specialist whether a broker is involved. Mortgage brokers are usually paid a fee for their services that may be separate from and in addition to the lender's origination or other fees. These fees can include loan origination or underwriting fees, broker fees, and transaction, settlement, and closing costs. Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as application and appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. "No cost" loans are sometimes available, but they usually involve higher rates. Make sure to ask what each fee includes and a explanation of each because several items may be lumped into one fee. A broker's compensation may be in the form of an add-on to your interest rate or "points" paid at closing, or both. Points are fees paid to the lender or broker for the loan and are often linked to the interest rate. Usually the more points you pay, the lower the rate. You should ask each broker on the different fees that will be involved in your loan and how they will be compensated. Negotiate with the brokers and lenders to reduce fees associated with your mortgage loan.
It is important to get specific information about mortgages from several lenders or brokers to find out all the costs involved in the mortgage loan. This can include information about the same loan amount, loan term, interest rate and type of loan so that you can compare the information. The following information is some questions to get answered from each broker and lender:
- Ask each broker and lender for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that week or day.
- Ask whether the rate is adjustable or fixed. Keep in mind that when interest rates for adjustable-rate loans go up, generally so does the monthly payment.
- If the rate quoted is for an adjustable-rate loan, ask how your loan payment and rate will vary, including whether your loan payment will be reduced when rates go down.
- Ask about the loan's annual percentage rate (APR). The APR takes into account not only the interest rate but also broker fees, points, and certain other credit charges that you may be required to pay, expressed as a yearly rate.
No matter if you have good or a bad credit rating, remember to shop around, to compare all costs and terms, and to negotiate for the best mortgage interest rates.