Shopping for the lowest interest rate can be a challenge. Many different variables comes in the play in determining what interest rate a loan applicant will receive. Listed below are some tips and things to remember when shopping for a mortgage. USDA Mortgage Source is Florida + Georgia’s local Rural Housing loan specialist. If you have questions, just submit the short Info Request Form on the right side of this page for quick service. Mobile phone users can find the Info Request Form here. You can also call us at ph: 800-743-7556
- The advertised mortgage rate likely include added points
You know those mortgage rates you see on TV, read in the news paper or view online. Well, most of the time they require you to pay mortgage points. So if your loan amount is $200,0000 and the rate is 3.75% with 1 point, you have to pay $2,000 in added costs to get that rate. In addition, there may also be other additional lender fees on top of that. Many lenders use this trick to get their phone to ring, just to inform you later your closing costs will be thousands higher. Read the fine print, be sure to compare not only rate, but also lender fees.
- The lowest mortgage rate is not always the best.
Most mortgage shoppers are probably looking for the lowest interest rate, but at what cost? As noted above, the lowest rate may have large fees or require discount points, which will push the APR higher and make the effective rate less desirable. Many first time buyers have limited funds to begin with and can’t afford to pay added discount points, etc. However, it may make sense in the long run for some borrowers to pay points. Any trained loan specialist can show you the numbers to see if it makes sense. Be sure you know exactly what is being charged for the rate provided to accurately determine if it’s a fair deal.
- Compare different mortgage programs.
Low interest rates are NOT everything, each loan program may have different variables that can make one a better choice. Example – Let’s say home buyer Brian is looking to get a new mortgage, he is trying to decide between the USDA and FHA mortgage. Brian ends up choosing the FHA mortgage because the interest rate is a little lower and he thinks it’s a better deal. What Brian later discovers is the FHA loan monthly mortgage insurance costs (MI) is nearly 2 times higher when compared to the USDA loan. So even with a slightly lower interest rate, the FHA mortgage PMI much more each month. Financially speaking, the USDA mortgage would have been a much better choice for Brian. In addition, he can save his money as since USDA is 100% financing and doesn’t require a down payment.
- Check your credit score
Fix any credit issues before starting the mortgage approval process. Understand that shopping around may require multiple credit inquires, which is ok if done within 30 days. Try not to apply for any other types of loans before or while shopping for a mortgage. The last thing you want is for a senseless credit card application to ruin your chances of getting approved. Remember, the interest rate you receive is tied to your credit score. Higher credit score means less risk for lenders, which in turn mean lower interest rate for you. Example: a borrower with a 740 credit score will likely receive an interest rate of 0.5% lower when compared to borrower with a 630 credit score.
- Have patience
Purchasing a home is a big step, especially for first time owners. Don’t feel pressure from realtors or anyone else to make quick decisions. Take your time, do your due diligence and consult with people you know and trust. Don’t ever feel obligated to work with someone, especially if they’re pushy.
- Stay local
Purchasing a home in Florida? It’s a good idea to deal with a Florida lender. There are many reasons for this, mainly your local loan officer will have a better working knowledge of the area. In addition, closing costs and government fees will vary from state to state – your local mortgage company will understand this. If you are considering a specialty mortgage, like a USDA loan, be sure your lender has experience with the program. Just because they “offer” a given program doesn’t mean they fully understand it. Ask the loan specialist if they have closed any USDA loans? Purchasing a home is big deal, don’t be afraid to ask questions.
USDA Mortgage Source specializes in USDA Rural Housing loans in Fla & GA. Contact us at 800-743-7556 or all the program details.