Learn the best way to compare mortgage rates.
Homebuyers and owners wishing to purchase or refinance, respectively, should compare mortgage rates before choosing a lender. Freddie Mac states that the interest rate is the biggest factor people consider when choosing a mortgage. A mortgage is the money borrowed from a financial institution that enables homebuyers to purchase a home or refinance a home they already have. There are fixed-rate mortgages in which the rate doesn't change over the course of the loan period, and adjustable rate mortgages in which the interest rate fluctuates during the loan period.
Homeowners wanting a lower interest rate than their current rate will benefit from rate comparison tools. Buyers can use online tools to compare mortgage rates and types and find the best lender.
The Federal Reserve Board recommends talking to desired lenders and asking for a list of current mortgage rates. Buyers should ask if the rates are good for a day or a week, and get lists for both fixed and adjustable rates. Buyers can use these lists to compare lenders and rates. Once a buyer sees the average rates, they can try to negotiate with the lender for a lower rate or lower fees. The Federal Reserve Board offers a printable mortgage worksheet to help buyers keep track of rate information.
Another option includes going online and plugging information into an online rate comparison tool. A site like Interest.com lets buyers compare interest rates by state and city or zip code. Online tools offer choices for homebuyers or for owners who wish to refinance. Some of these services will give quotes, while others will share the information given with a variety of lenders.
If a buyer chooses to use printed copies of mortgage rates from lenders, choosing the best rate includes considering all the fees involved with the mortgage. According to CNN Money, buyers should be aware that a 30-year mortgage has a lower monthly payment, but a higher interest rate than a 15 year mortgage. Other fees to consider include high closing costs, underwriting fees and possible private mortgage insurance. All of these fees increase the mortgage payment, so comparing the rates and the fees is important.
Using online tools is simple and quick. At Interest.com, buyers put in their state and city or zip code. Then they add how much they need to borrow, choosing fixed or adjustable rates and the duration of the mortgage. The site then searches regional lenders and produces a chart that shows interest rates, annual percentage rates, lender name, closing costs, points and estimated monthly payments. Buyers can then choose up to five lenders to compare and contrast.
At a site like Compare Interest Rates, buyers put in information such as type of home needed, type of loan, credit profile, amount needing to borrow and location. The site then analyzes the information and collects personal information such as the buyer's name, address and phone number. The site then sends the information to lenders who contact the buyer. The downside to this sort of rate comparison service is that a buyer is open to numerous calls from salespersons, even after choosing a lender.