Mortgage Rate Know-How

So you’re buying a home, or you’re refinancing your current one. I bet I can guess what is on your mind. A bunch of numbers and a major headache, right? Well, it doesn’t have to be that way. It is a hassle getting a mortgage, and there are some calculations that must be done in order to get the right mortgage at the right rate. But if you follow some basic steps, the process is so much easier.

First, don’t stress. Just research the mortgage rates in general, rather than going crazy over memorizing every possible lender and what mortgages and rates are offered with each. Lenders vary, products and payment plans vary, and interest rates—of course—vary also.

So the best way to know you are getting the right mortgage is to get an overall idea of what the interest rates are right now, decide what type of loan you want, and then choose a few lenders you trust from which to pick.

A good place to find the mortgage rate trends are in Wall Street stocks and bonds, and/or in the state of the economy. Since investors are the main source of mortgage money, Wall Street is bound to give somewhat telling predictions of what the mortgage market will be doing. The economy may be a little more abstract, but the overall, economic news generally hints at the coming mortgage market trends as well.

To find a good mortgage rate you have to know more than the rates. One essential tool in mortgage quoting is called the Annual Percentage Rate, or APR. This is the cost of the mortgage expressed as a percentage, or the annual interest of the loan. So, a five percent APR means you pay five percent of the loan amount per year, in addition to paying off the loan amount. This is crucial to choosing a mortgage lender because it shows you how their rates compare to other lenders in the market. It may be hard to dissect a figure that includes all kinds of fees and future interest increases, but by knowing the APR, you have an idea of what you will be paying throughout the loan and you can contrast that to other lenders’ rates.

Meeting with a lender is so important in the mortgage shopping process! You cannot just look at the numbers, pick a loan and make a phone call to purchase. This is not like buying a new sweater, where you have one in mind that you like and you can order it online or at the closest department store! You need to sit down with a lender and have a consultation, so a professional can tell you how much you can afford and what kind of mortgage you need. When you are ready, you can go through the pre-qualification process in order to then go onto purchasing a mortgage.

Finally, lock in your rate. This is like a promise that the lender makes to keep your interest rate the same during the processing or commitment period, which is the period of time it takes to close the mortgage.