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A Quick Guide to Shopping Rates Online



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By : Andy Denton    99 or more times read
Can’t decide which mortgage product suits you best? Try shopping for mortgage rates online and you’ll have a plethora of choices. Although most of us are already aware of the dangers that adjustable rate mortgages can bring (thanks to the real estate market collapse), not all potential homebuyers have a sound idea of how to choose the best mortgage that they can easily manage.

Because many are now enticed of how low interest rates can reduce monthly payments, homeowners are scrambling to get the best rate in loans for which they qualify. Shopping for mortgage has never been easier but these tips will guide you on how to properly compare mortgage rates.

Step 1: Check the lender’s criteria for qualification
Lenders differ from each other in terms of classifying which borrower is well qualified. A combination of factors such as credit score, principal payment, current debt and other criteria are considered by banks. If you think you don’t qualify in some banks, do not include them in your list.

Step 2: Review national average rates
Every week, Freddie Mac publishes its Primary Mortgage Market Survey (PMMS) that “surveys lenders each week on the rates and points for their most popular 30-year fixed-rate, 15-year fixed-rate, 5/1 hybrid amortizing adjustable-rate, and 1-year amortizing adjustable-rate mortgage products” along with comparisons of rates on different U.S. regions. This is a good starting point on your search since you’ll get a good idea of how rates are faring in your area.

Step 3: List loan-related fees among lenders
All lenders charge borrowers on the processing, approval and making of the mortgage loan. By listing these charges, you can find better gauge which lender is competitive enough to keep your payments lighter. After determining their uniform charges, remember to separately list the fees which are independent to each lender to keep a more accurate tally later on. These “other” fees include processing and wire transfer fee, origination fee, mortgage insurance premium, appraisal fee, credit report cost, tax service fee, underwriting fee, application, commitment, etc.

Step 4: List the lock-in period of mortgages
Because mortgage rates depend on a number of factors, they vary daily – keeping borrowers and lenders tuned to its movements. In order to minimize the risk that you will be paying a higher mortgage than the one that you had originally applied for, locking in a mortgage rate is highly encouraged. The most common lock-in periods are 15, 30, 45 and 60 days. List the lock-in fees and penalties that lenders are charging since you’ll be spending for this eventually.

Step 5: Group all lenders sharing the same interest rate and lock-in periods
Create a table that will help you compare lenders with similar offers. Refer to your PMMS if they are not offering rates that are way too high than the national average. By grouping lenders together, you can eliminate any biases that may come during your research.

Step 6: Add the independent charges of each lender
By calculating the annual percentage rate (APR) per lender, you will be able to arrive at a more accurate decision of which lender will offer a more competitive rate based on their loan options. Remember, a high mortgage loan processing fee doesn’t necessarily mean the mortgage carries a high interest rate. It all depends on the offer of the lender.
Andy Denton is the COO of www.Realty.com. Realty.com is a real estate search portal, dedicated to connecting home buyers and sellers to trusting real estate services. Follow the Realty.com blog for up to date housing news and trends. And monitor local mortgage rates at RealtyGadget.com.

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