Mortgages

Note that ALL, ANY, and EVERY lender advertised loan rate does not account for your own risk profile, so DON'T assume that the company that advertised the lowest rate in their ad will actually give you a rate that is lower than their competitors for a person of your risk profile.  To get the cheapest mortgages, you will have to receive a quote for yourself from each lender and then compare that quote to the other quotes you have received.  Your credit score and ability to provide documentation of your income and assets to the lender are the keys to receiving the cheapest mortgage.  Again, low advertised rates are used as a bait and switch tactic by unethical banks so don't be a victim of this. 

Don't fall victim to bait and switch advertised rates!

When Should I Apply for Quotes?

Home Buying 

Once an offer is accepted on a house, you will have time until closing to compare concrete mortgage offers.  Just because you are pre-qualified by a lender for an amount, doesn't mean that you should ultimately use that lender for your loan.  Get quotes from different lenders and determine for yourself what mortgage is best for your circumstances.

Refinancing 

To save money with refinancing, the interest savings of the new loan must cover the fees of the new loan. When there is a 2% spread between the new interest rate and the rate on your existing loan, you will normally save money by refinancing. When looking to refinance, shop other lenders first and then ask your present lender if they are able to beat the best price you found elsewhere.

What To Expect

To receive an actual quote for yourself, you will have to provide the lender authorization to look up your credit score and documentation which consists of providing the lender with information regarding your income, assets, and employment.  Documentation ranges from "full-documentation" where the borrower has fully verified sufficient income for the last 2 years, to "no-documentation" where the borrower provides no information on their financial condition. The more documentation the borrower can provide, the lower the risk to the lender, so the better the deal they will receive. If the borrower can't provide full documentation, it is best to meet the highest level of documentation they are able to provide, unless they voluntarily choose to avoid it and pay a higher price.

The 3 parts of a mortgage quote are the interest rate, points, and fees.  Read below to see how the interest rate, points, and fees work so you will be able to find the best mortgage for your situation.

Interest Rate

The interest rate can be either a fixed-interest-rate where monthly payments stay the same or an adjustable-interest-rate where monthly payments fluctuate within cap limits according to changes in the market interest rate after the initial rate period. If you are in a tight budget and at risk to increases in your required payments, you should opt for the fixed rate mortgage or request an adjustable rate mortgage with caps and an initial rate period that protect you.

Points

1 point equals 1% of the loan.  Points are paid to lower the interest rate. If you can afford paying points, in most cases it is a good investment if you plan to hold the mortgage for at least 3 years. The return frompaying points increases as you hold the mortgage longer due to the cumulative effect of the lower interest payments.

Fees

The Loan Origination fee, read bank fee, is usually 1 point or 1/2 a point and is normally expressed as a percentage of the loan amount just as points are expressed.  The Settlement fees are fees for the application, inspection, and property appraisal.  Almost all lenders don't charge an application fee and fees are paid only if the loan closes.

How Is Your Credit Score Determined

The most valuable thing we have is our good name.  Your credit report is the most common reflection of your reputation as someone who pays bills on time and is financially sound.  Most consumers rarely check their credit score until after they've been denied credit or otherwise encounter a problem.

The credit score evaluates the information in your credit report and compares this information to the patterns in millions of past credit reports to determine your credit score. The credit score is determined from the following 5 sections: 35% for how recent the delinquencies are and how many times they occurred, 30% for how large outstanding balances are and the ratio of balances to credit limits, 15% for the age of the oldest account and the average age of accounts, and 10% for the number of inquiries and new account openings.