Getting The Low Mortgage Rate You Need

Despite the number of potential lenders available to offer financing for your house, obtaining a low mortgage rate for your house may not be as easy as you think it is. Since the latest financial crisis hit the financial markets around the globe and the money in the market has become a lot scarcer, lenders have once again started negotiating on their terms. Since your mortgage payment is likely to be on of your biggest expenses in your monthly budget, there are a few points that one must keep in mind to secure that low mortgage rate:

Step 1: Know the Current Market & the Base Rates

It is important to know the current mortgage market. If there is a lot of lending going on and chances are that as the banks are business hungry they will be willing to go to the bare minimum to get your business. If the market is tight and there is very little lending going on, that means that banks are being cautious in giving out money and will try and push business away with higher interest rates. Similarly, know what the present base interest rates are as determined by the Federal Reserve Bank. That will give you a point to anchor yourself for the lowest rate loans.

Step 2: Determine Your Needs

The length of the loan can play a major role on the interest rate the bank may be willing to offer you. You are likely be faced with a more expensive loan for longer terms, and less expensive ones for shorter terms. Bear in mind that the monthly payment figure may look lower on a longer period of loan, but at the end of the day you are not only paying bank more money but also paying it back at a higher interest rate.

The amount of down payment or equity as it more commonly known can also play a part in determining what your mortgage rate will be. You may have some negative entries in your credit file, but if you are willing to put in a reasonable down payment to show the bank that you are serious about the business, you may end up with more favorable rates. If you are willing to pay more than a 20% down payment, you will be eligible to get a waiver on the mandatory mortgage insurance that can add to your monthly payment.

Step 3: Know Your Credit Issues

All loans are subject to a credit check. If you have had problems with your credit history, lenders may consider you a high-risk borrower and may charge you a higher interest rate. You can offset this by providing details of your financial records and supporting documents of your financial position and credit worthiness.

Step 4: Compare Your Options

Obtain written quotations from various financial institutions that you have identified. Read over the fine print very carefully as there can be various hidden charges and service fees attached to offers that may look much better than others. Remember that you can still negotiate on the best offers.

Step 5: Use of Mortgage Broker (Optional)

Mortgage brokers are professionals that negotiate with the lenders on your behalf for the best home equity loan rates. They usually charge a fee for their services but can influence the mortgage rate at the end of the day.

Step 6: Complete the Application

Once you have compared your options, and chosen the best mortgage rate, just fill out the mortgage application, provide the necessary paperwork, and await the approval.

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