Are you thinking about refinancing your home? Good for you! It takes a lot of courage to make this decision. And although it’s not easy, there are many benefits that come with it. Now, take a deep breath and get ready. The process is long and it will take a lot of hard work. But everything can go smoother if you learn one thing: how to shop for mortgage rates.
Don’t underestimate this step! Rates change constantly, so making the best choice for you is not always as easy as you may think. But don’t worry. This article will help you understand what works and what doesn’t when it comes to shopping for rates.
How to shop for mortgage rates
- When shopping for offers, always look at the annual percentage rates, or APR. This is the most accurate reflection of the total mortgage cost, and it includes the interest rate, late fees, lender fees, interest points and even personal mortgage insurance, when required. Lenders are obligated to inform the borrowers of the APR in writing within three days of the application.
- It’s also a good idea to check up on your lender before signing anything. They might offer you a great deal, but, if they’re not trustworthy, you could be in a lot of trouble. A lot of websites offer lender reviews, such as those of the Better Business Bureau or Consumer Affairs. You might need to spend some time researching, but at least you’ll be safe.
- Don’t be afraid to use a mortgage refinance calculator. Many people avoid doing it because they think it’s too complicated. But it can be a really useful tool. Not only will a mortgage calculator allow you to estimate how much you have to pay on a new mortgage, but it can also help you decide if an ARM is worth the risk, find out when to get rid of private mortgage insurance, and aid you with your plans to pay off your mortgage early. Using a mortgage calculator can save you money!
How not to shop for mortgage rates
There’s a right way to shop for rates and a wrong way. And it’s important that you know what the wrong way is, so you can avoid it.
- The first thing you need to avoid when shopping for rates is applying for new credit. This can really set you back as the underwriters re-configure the loan offer based on additional risk. And it can turn into a huge obstacle if your debt-to-income ratio increases.
- Don’t assume anything. Always check your credit report and make sure it’s up to date. Even if you take care of your finances, there’s always the possibility of human error, and false entries can affect your creditworthiness.
- I saved the worst for last: choosing the cheapest option. Don’t do it! It’s one of the biggest mistakes people make, because cheaper isn’t always better. Rather than going for some really low rates offered by some unknown companies, look for reliability.