What Is the Safest Way to Compare Mortgage Rates?

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mortgage rates

Buying a home takes on a lot of factors. Aside from the process of searching for a suitable area and setting up a loan to help you buy the property, you have another factor to keep an eye on.

It is the mortgage, which kicks in after you buy your new house.

For this, you must find the best mortgage rates that would suit your preferences. Closing a mortgage is often the longest step, despite being the last one in the whole buying process.

Today, we look at how to compare mortgage rates and note the best ones to choose. Read on and find out more:

Using a Mortgage Calculator

Shopping and comparing mortgage rates mean using diverse methods to compare them. Use a mortgage calculator to help project the rates. However, you might need to take note of the variables necessary to help your calculations.

You need the home price and the down payment. It accounts for the price of the home and the amount you pay upfront.

Along with this are the loan terms and interest rate. Other factors included are the homeowner’s insurance, property taxes, and fees to your homeowner’s association.

Entering these variables into a mortgage calculator can help see how each affects your monthly payments, mortgage interests, and the loan’s total cost. You can use this mortgage calculator to know your rate forecast.

Checking the Type of Mortgages

There are also different types of mortgages you will encounter. Each depends on factors such as your credit score and employment history.

The debt-to-income ratio also comes into play here as well. Meanwhile, refinance rates could appear when revisions come up for your loan.

Noting these factors, the lender would offer any of these mortgage types. Keep reading to learn about the most common ones below:

Prime Mortgage

This type of mortgage is for less risky borrowers with credit scores of at least 670. For this, the candidates have to make a considerable down payment, which usually runs at 10-20%.

In this case, you also get lower interest rates. It is an economical option if you are in an excellent financial situation.

Subprime Mortgage

If you have credit scores running within the 580 to 669 range, you might qualify for subprime mortgages instead. The increased risk to lenders also means higher interest rates.

Subprime mortgage structures come in different forms. Among these is the adjustable-rate mortgage.

Alt-A Mortgage

You also have a mortgage type sitting between prime and subprime. It is the Alt-A, also known as Alternative A-paper mortgages.

These are low-doc or no-doc loans. It means they do not require much documentation to prove a borrower’s income or assets. If you have a hard time gathering all the necessary documents, opt for this mortgage type.

However, the way this mortgage type runs makes it a risky option. Even so, the Alt-A mortgage works well for those with sporadic income sources.

Comparing Fixed Rates vs. ARM

To accomplish this task, look at your mortgage options’ rates. With fixed-rate mortgages, they lock you to a consistent interest rate. It is the rate you pay for the rest of the loan’s duration.

In this case, when your property taxes may fluctuate, your loan rates remain the same. The common term durations range from 10 years to 30 years. The 30-year loan term is the most common since they offer the lowest monthly payments.

Meanwhile, an adjustable-rate mortgage has interest rates changing over time. In most cases, these types of mortgages have a low-interest rate during the introductory period. It means you will have this within a three-to-ten-year period but would end up with shifting rates as time passes.

Considering Discount Points

You can also look at discount points to reduce the mortgage interest rate. In this case, a discount point would offer 1% of the loan amount, reducing the rate by 0.25%. Even a slight reduction could mean a lot for your financial stability in the long run.

When playing discount points, you will shell out a lot more but pay less. It means spending thousands of dollars upfront while reducing the monthly payments. It is an excellent option if you want less strain on your monthly budget.

Are There First-Time Home Buyer Programs?

Check if you qualify for a first-time homebuyer program. It is a common offering in many states with its mix of programs to help home buyers.

One of these includes down payment assistance. It gives you favorable interest rates and tax breaks. It is a great way of moving out of apartments without making your finances suffer.

Some of the programs work within a particular geography. Others assist homebuyers that belong to certain professions. In case you qualify, give this a look and see what you can get from it.

Checking the Closing Costs

Closing fees come up from the lender and third parties. They would not affect your mortgage rate unless you went for discount points early on.

These closing costs amount to 3% of the purchase price. They also appear when you close the mortgage and finalize the purchase. These contain various fees such as an application fee, appraisal fee, and so on.

You can see these costs since the law requires transparency. You can also check out the loan estimate form to determine services to opt for and get lower closing costs. The good news is that it is okay to shop around for lower fees.

Find Better Mortgage Rates Now!

Shopping for mortgage rates requires you to compare various fees and rates. You can use a mortgage calculator to project the monthly fees necessary for payment. After all, getting the best rates on your mortgage would mean monthly payments that are not heavy in your pockets.

We can also help you find the best mortgage loan available, whether you need help purchasing a new home or paying off your credit cards. Contact us today, and we can help you with your loan consultation.

At 7th Level Mortgage, we are an experienced team of mortgage professionals based out of New Jersey and serving the east coast from Pennsylvania to Florida, including Delaware and Maryland. We have won numerous awards for our excellent professional work and reputation with clients for being extremely diligent, accessible, and hands-on throughout the entire mortgage process.