Securing a mortgage loan today for a purchase or refinance is looking very attractive with interest rates near 4% on long-term 30 year fixed rates. Over the last couple of months, mortgage rates have hit record lows three times what the last one being last week with a 30 year fixed rate mortgage hit 3.94%.
Everybody wants to get the absolute lowest possible interest rate. A smarter approach when looking at the hard numbers would be to consider getting the lowest cost combination of rates and fees. Due to more recent restrictive lending laws, no cost refinances have evaporated as lenders’ no longer have the flexibility over mortgage interest rate pricing they used to. Just because the no-cost loan has been reduced that doesn’t mean refinancing shouldn’t be at least considered.
A lender’s best mortgage rate quote is not necessarily a locked rate.
Let me say that again a lender’s best mortgage rate quote is not necessarily a locked rate. Please take this with a grain of salt. Most people shop by interest rate first followed by service and everything else thereafter. If you are going to shop on interest rate and costs alone all other things considered secondary, then know the difference between a locked rate and mortgage rate quote.
A mortgage rate quote is a great place to start because it provides a benchmark scenario working with the lender of your choice. A typical mortgage rate quote is based on a loan-to-value which includes a loan amount, approximate value, approximate credit score, the purpose and state for which the property is located in. That’s a mortgage rate quote in a nutshell. A mortgage rate quote can be provided by a mortgage lender upfront or more accurate one can be provided after you allow the mortgage lender to pull copy of your credit report and send in your financials.
The locked mortgage rate is just that. That means the lender has locked your mortgage rate and the rate cannot change for a period of 30, or 45 days. Loan locks are also sometimes as short as 15 days and as long as 60 days, but the average mortgage lock time frame is 30 days. If your mortgage lender has locked your interest rate and you are happy with the interest rate and fees you are getting. Move forward with that lender unless you’re with the way they operate their business.
Don’t switch mortgage lenders based on a rate quote when you have a locked rate.
Sometimes doing this might make sense. If the mortgage lender isn’t returning your phone calls or there is a certain level of ambiguity in your file that you are otherwise uncomfortable with, that is reasonable grounds to consider working with another lender. Understand when a mortgage lender locks your loan (especially for free) they are taking risk on you.
They are in good faith locking in your interest rate and preserving the integrity of your loan. So if you are “locked in” at a extremely low interest rate and rates improve by .125% or .25% don’t necessarily throw the original lender under the truck it’s not worth it for what may not come out on the other side with a hair less in rate.
So how is the process usually done in securing the interest rate?
Most people will call around or e-mail mortgage lenders and get each mortgage lenders best mortgage rate quote and then make a determination as to which lender to use by their fees as everyone perceives mortgage loans to be commodities and rightfully so. Once narrowed down, the borrower we usually applies with one lender and from there, they can order the appraisal and lock in an interest rate appropriately.
Unless you’ve previously used lender you are working with, most lenders will not lock your interest rate upfront on a refinance because it’s based upon a loan-to-value and an appraisal is needed to determine a loan-to-value and subsequently, the rate lock.
The purchase loan transaction is a little different. You can usually lock in your purchase interest rate what front because the appraisal usually comes in at or very near the purchase price.
Get the best mortgage rate quote on your purchase or refinance then lock that interest rate as soon as possible.
Do your due diligence, compare mortgage rates, search for the lowest cost loan than locking your interest rate and begin the long process to close escrow within 30 days. Don’t be too concerned if rates move up or down .25% because rates do do that on a daily basis sometimes even more depending on what’s happening in the market. Don’t lock a mortgage loan with a lender and then take their information and shop it with another lender, not only do you risk losing the loan, you also risk losing the locked in interest rate because lenders today usually don’t extend loans beyond 30 days without some level of cost.
Get a mortgage rate quote to do your mortgage shopping. Get the best mortgage rate quote when comparing rates so you can lock in today’s lows. See the differences between the best mortgage rate quote versus a locked rate.
RELATED MORTGAGE ADVICE FROM SCOTT SHELDON
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