The mortgage interest rate you pay is going to be one of the biggest factors in your monthly payment (second, of course, to your loan amount). Depending on the loan amount and interest rate, even saving 0.25% can equate to $20,000 or more in savings over the life of the loan.That’s why it’s so important that you spend a little time and focus on finding the best mortgage rates. And it can be daunting – but the easiest thing you can do is simply shop around. Just education yourself on things like origination fees, lender charges, and more, then compare apples-to-apples loan options. With that in mind, here’s where you can find the best mortgage rates and lenders (and seriously – don’t just take our word for it, shop around)!
Check out our list of the best online mortgage lenders here to get started on your rate hunt. We recommend using Credible Mortgage as a good starting point, because unlike other comparison tools, you can do everything online (and you won’t get bombarded with 100+ phone calls).
A lot goes into the final mortgage rate that you’ll get from a lender.Some people try to create a relation between 30-year fixed rates and the 10-year Treasury bond. That isn’t so straightforward. As the 10-year yield went down this year, the 30-year mortgage went up.Instead of looking at economic factors that affect mortgage rates, we’ll discuss them in terms of individual rates.When a lender is determining a mortgage rate, they look at several factors specific to the borrower. As reported by consumerfinance.gov, these include:Another important factor not mentioned by consumerfinance.gov is your income-to-debt ratio. This ratio looks at how much your income is vs. how much is being paid to debt. It’s a quick way to determine if you are able to take on any additional debt. Most lenders want to see a ratio of 0.40 or lower.
Fees vary by lender. Some of the most common fees include:
30-year, fixed-rate mortgages allow you to spread your loan out over a longer period of time, which reduces your monthly payment. For this convenience, you’ll pay more interest over the life of the loan.If you want to pay less in interest but don’t want the interest rate to change, a 15-year, fixed-rate mortgage is your best option. These mortgages will have a higher monthly payment because you are cutting the loan term in half compared to a 30-year mortgage. A 15-year fixed also generally approves for a lower amount (i.e., a smaller loan).Note that paying a 30-year, fixed-rate mortgage like a 15-year (double the monthly payment), assuming both have the same interest rate, works out to about the same savings in interest as if you had a 15-year, fixed-rate mortgage.Finally, there is the adjustable-rate mortgage, or ARM. ARMs come with different terms and their rates change during the term. There is usually a fixed-rate period, but thereafter, the ARM can begin adjusting its rate up or down. This will cause your monthly payment to fluctuate. If rates rise significantly, so will your monthly payment.
Like any purchase, shopping different lenders will give you a good idea of the rate you’re likely to receive. Besides the rate, also factor in other terms such as the points offering, if the lender is easy to deal with, and what kind of reputation the lender has. Also, consider the various fees — you may be able to find a wide discrepancy between different lenders.In the end, finding a good mortgage rate is simply a lot of time on the phone getting questions answered, submitting documents, and waiting on other people.