Find the Lowest Rate Possible
By Steve Gillman - 2005
Do you really want the lowest rate on that mortgage loan?
Maybe - but not if it ends up costing you more. You have to look
at all the factors involved.
For example, is the loan a fixed-rate loan or a variable rate
loan? The lowest interest rate now could become the highest rate
later. Is there a balloon? You don't want to have to refinance
in five years just to discover that interest rates then are so
high you don't qualify. Is the interest rate low due to high
fees and points that will cost you more than the savings? You
don't save what they say you do unless you keep the loan for
the whole term, whether that's 15 or 30 years.
What you need to do, then, is determine first what kind of
loan you feel comfortable with. For this you need to seriously
consider how long you are likely to keep the mortgage loan. It
may make sense accept a variable rate loan - or even one with
a balloon - if you know you'll be moving in a few years.
On the other hand, if you are fairly sure you are going to
be in your new home for a long time, you might prefer the security
of a fixed rate. Also, keeping a loan for a long time means that
paying points for the lowest rate also makes more sense. It typically
takes at least a few years for the savings from a lower payment
to equal the cost of the points.
Getting the Lowest Rate
Given the above factors, it is easy to see that the lowest
rate is not the only consideration. But once you have determined
what type or types of loans you are interested in, then you can
fairly compare the various offerings, to get the lowest interest
rate on a loan that works for you. It is time to go shopping.
You can start online, by searching for "mortgage loans,"
"low rate loans," or something similar. Just looking
at the offerings advertised will give you some idea of where
the best rates are found. However, the final rate will be determined
by your credit score as well, and different lenders have different
rules about that, so be aware that this first look will only
give you a rough idea.
Other places to look for low interest rate loans are banks,
credit unions and mortgage lenders in your own town. Since they
are run for the benefit of their members, it might seem that
credit unions would have the lowest interest rates and fees.
This is sometimes true, but not always, so don't just check a
few credit unions - check couple different types of lenders as
Ask a lot of questions. In particular, ask about any and all
fees and costs. I once talked a lender into skipping the appraisal
on a home, which saved us several hundred dollars. To compare
the various loans fairly, you need to know all the costs. Getting
the lowest rate is great, but it is just one factor in the total
cost of a loan.
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