Sunday, October 4, 2009

How to Get the Best Rate

During the holidays I have been working hard to buy my first home. Here are a couple lessons I have learned during my agonizing first experience of looking for the right loan for my home.

First word of advice would be never work with only one mortgage agent/broker/office/bank. You wouldn’t buy your car without shopping around, why would you do so with a mortgage? Working with multiple mortgage brokers and banks allows you to get competitive rates. It’s this competitive environment that will let you be sure you got the best rates you possibly can for your home. This also prevents brokers from using “bait and switch” strategies to get you in the door and lock you down.

In addition, even if the broker is your best friend/mom/ mother-in-law, they each have access to different banks and different loan structures. Some brokers may just have access to better rates for the specific loan you want.

If you do not know which broker to go to, filling out online mortgage applications will quickly get you multiple agents that will be willing to compete for your business.

When you decided to start shopping for mortgages, make sure to start the search and submit your initial applications within a short period of time. Each individual lender who receives an application from you will pull your credit report. Credit reporting agencies know that a homebuyer will shop around for a loan, so they usually will count consecutive credit report requests within a short period of time as only one request. Unfortunately, your credit score will decrease if your credit is pulled too often over a long period of time.

A good resource to use as leverage with your current broker will be offers very good resources that you can use as leverage to lower your rates.

Always ask for the rate quote in terms of both “rates” and “APR”. APR is the rate inclusive of all expenses and fees you would have to pay. Use this for an apple to apple comparison between the quotes offered by different lenders.

Lastly, this is ultimately a business transaction. They want your business as much (if not more) than you want that new home. Negotiate with the lender. You can usually get sometimes rates lowered, or even have some of your closing costs covered by the lender/broker – never hurts to ask.

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