How to find the best rates without losing the whole day. (iStock)
Securing a lower interest rate on loans is a smart way to manage your personal finances, plus it saves money. The interest charged by mortgage lenders can vary greatly, and a difference of one percent can save thousands over the term of your mortgage. And the lowest payments each month don’t hurt.
Unfortunately, searching for the best refinance rates and offers can take time. In order to minimize the number of hours you spend on the process, it may help to follow these seven time-saving tips to help make the process smoother.
1. Use an online marketplace to compare rates
Visiting each lender’s website takes a long time. Fortunately, it is not necessary. You can get personalized rates much faster by visiting an online marketplace like Credible, where you can compare multiple lenders and mortgage rates at once. Simply enter certain information, such as your credit score, and you can find the best deals available.
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2. Know your credit score
While you may qualify for a new mortgage or mortgage refinance if you have a fair or even low credit score, you are likely to pay a higher interest rate. Save time by knowing your score, so you can focus on the lender requirements that are right for you.
If you already know your score, you can easily search Credible’s free online tools to see what mortgage refinance rates lenders are offering now.
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You are entitled to a free copy of your credit rating every 12 months from each of the three reporting offices. Order yours online from annualcreditreport.com, which is the only authorized website for free credit reports. Some banks will also provide customers with a free credit rating through their online banking portal. If your score is low, take steps to improve it before starting the mortgage process, such as debt consolidation, which can reduce your debt / income ratio.
3. Determine how much house you can afford
Instead of wasting time trying to qualify for a loan that doesn’t fit your budget, know how much home you can afford. Sometimes buyers don’t consider the total cost of home ownership, which includes taxes and insurance. Some houses may also have homeowner association fees. And if you don’t invest enough money in the down payment, you may need to take out mortgage insurance.
Add up your monthly debts, like your current vehicle or student loan, credit cards, or mortgage. Then make sure your debt-to-income ratio with your new mortgage payment falls within the range required by mortgage lenders, which is 43 percent or less, according to the Office of Consumer Financial Protection. You can use an online mortgage calculator to determine possible monthly mortgage payments.
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4. Get prequalified
In addition to knowing your monthly budget, you can speed up the mortgage process if you pre-qualify. This will help you avoid wasting time on houses you can’t afford. It also gets the ball rolling with your lender, which can save time during the application process. When you use an online mortgage broker like Credible, you can get personalized rates and pre-approval letters without a thorough consultation that could negatively affect your credit score.
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5. Be on the lookout for hidden fees
Just as interest rates may vary among mortgage lenders, their rates also vary. When comparing offers, look at the fine print to understand the total cost of the loan. Sometimes lenders offer low rates by charging upfront fees, called “discount points.” Compare offers by eliminating discount points.
Also look at other mortgage features that can add to your bottom line, such as prepayment penalties, balloon payments, adjustable rates, and settlement costs. A quick way to find the best deal is to look at your Annual Percentage Rates (APR), which represent the total cost of the loan in terms of a Percentage Rate when considering the rates.
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6. Take advantage of veterans options
If you are a veteran or a veteran’s spouse, you may qualify for a VA loan, which can offer low rates with no down payment or mortgage insurance. Unless you’re buying an expensive home or have a 20 percent down payment, you may want to start with VA lenders. This can be a great option for a first time home buyer.
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7. Work with experienced lenders.
A home is probably the biggest purchase you will make, and mortgages can be complex financial products. Only work with reputable mortgage lenders and trusted advisers. Credible can put you in touch with experienced loan officers who can help answer your mortgage questions.
Buying a mortgage can be a time consuming task. By knowing how to compare deals and streamline the process, you can make sure it’s a positive one, too. These steps can help you buy a new home or refinance your current mortgage without wasting much time.
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