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Tips for Finding Affordable Mortgage Rates

Buying a house is a big deal – it is, for most people, the largest dollar purchase they’ll make in their lives. Regardless of whether you’re buying your first house or your fiftieth, the most important thing about buying a house is getting an affordable mortgage rate. The mortgage rate that you get could make or break the purchase of your home – a high mortgage rate could lower the amount of money you can spend on a house, therefore lowering the range of houses you can look at purchasing. A lower mortgage rate, however, can raise the range of houses you’re looking at purchasing, and can help you afford your dream home.

The mortgage rate on your home is determined by the lender that gives you the money to purchase the house. The mortgage rate is, for all lenders, based off of the prime mortgage lending rate, also known as the prime rate, and then the lenders add their “points”. Points are interest percentages that the lenders add to the prime rate to determine the mortgage rate that they are offering you. Some lenders have much lower lender points than others, which is why it is so important to shop around for a mortgage rate.

When you’re shopping around for a low and affordable mortgage rate, you’re really shopping for a lender. It’s important that you find a lender you can trust – you’ll be dealing with them for the next one to 25 years, or even longer, depending on your mortgage. Perhaps the best place to start your search for affordable mortgage rates is on the internet. The internet has many searchable databases for you to use to compare mortgage rates.

You can find plenty of online lenders who will give you a mortgage rate quote – many of them ask for very little information while others ask for much more information. Regardless, it’s important that you provide identical information, and as much information as possible, to the lenders that you’re requesting a mortgage rate quote from. This will ensure that you have the best “apples to apples” comparison to make with your mortgage rate quotes.

Mortgage rates are determined not only by the prime lending rate and the lender’s points, but also by your credit rating. The better or higher your credit rating, the better rate you’ll receive. If you have a bad or low credit rating, you’ll be faced with higher mortgage rates. However, if you do end up with a higher mortgage rate than is average, sign for only a one year term on your mortgage – the lending company will likely lower your mortgage rate after you’ve kept your mortgage payments in good standing with them for a year.

One of the best places to start your search for an affordable mortgage rate is with your regular bank – if you’ve been banking with them for awhile, and perhaps have or have had other loans or mortgages with them, they may be willing to offer you a lower and more affordable mortgage rate just to keep your business. Start with your regular bank or lending institution and see what they have to offer you.

The next step is to go to your bank or lending institution’s chief competitors. Sometimes this competition can reward you with a much lower mortgage rate – if the competing lenders offer you a lower rate (they may do this to land your other business – and may require you to move your everyday banking to their institution), go back to your regular lender or bank and show them the offers you’ve received – it can be a real pain to move all your banking to a new bank and your current bank doesn’t want to lose your business, no matter how “big or small” it is. By showing your lender the offers you’ve received from their competition, they may be able to rework their offer to you and offer you a more affordable mortgage rate.

After you’ve determined the lowest available mortgage rate available to you by standard banks and lenders in your area, it’s time to research the less common lenders. Small lenders in your area will likely post newspaper or billboard ads offering impressively low mortgage rates – it’s important to remember that these advertised rates are for “star clientele” who have great credit ratings. If your credit rating is marred at all, you will likely not qualify for their advertised rate, however you should still research what rate they’ll have available to you.

Once you’ve researched the Internet and local lenders and businesses for affordable mortgage rates, you should have anywhere from at least five to 30 quotes to compare. It’s important to remember that other options on your mortgage can impact your rate – whether you’re going for an open or fixed rate, and the term of your mortgage. Compare wisely and remember to watch out for the seemingly minor differences that can impact the rate you’ll get.

Allan Young is a freelance writer who writes about mortgage rates.

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