Are you considering a new mortgage loan to purchase or refinance your home and want to know who the best mortgage lenders are? You might think that large banks offer the best mortgage rates and consider Wells Fargo or Bank of America as a matter of convenience. One of the most common mortgage misconceptions is that the best mortgage lenders all charge the same fees and that closing costs are regulated by law. Truth be told mortgage fees vary widely and the big names you see claiming to have the best mortgage rates overcharge closing costs. Here are several tips to help you find the best mortgage rates AND lender fees.
The Best Mortgage Lenders All Charge Different Fees
The fact is that banks like Wells Fargo rarely offer the lowest fees, despite what your loan officer might be telling you. The best mortgage rates from one lender might include discount points, an unnecessary expense for most homeowners. Other lenders claim to offer the best mortgage rates and overcharge their loan origination fee.
Shopping for the best mortgage rates and the lowest fees can be confusing, especially if you’re not going about it correctly. One common mortgage mistake responsible for many of your neighbors overpaying is comparing fees from different programs. It’s impossible to make an apples-to-apples comparison of the best mortgage rates and fees if you’re comparing quotes for a 30-year fixed rate to a 15-year adjustable rate mortgage.
How to Shop for the Best Mortgage Rates & Fees
Getting the best mortgage rates isn’t hard, especially if you agree to pay unnecessary discount points. The trick is getting the best mortgage rates while paying as little as possible at closing. Fortunately, using the new Good Faith Estimate makes shopping for the best mortgage rates easy, if you go about it correctly.
Here are six steps for getting the best mortgage rates without overpaying lender fees.
- Pick a Mortgage Program & Stick With It
- Check Your Credit Reports Before You Start Shopping
- Don’t Get Bamboozled By Discount Points
- Protect Your Credit Shopping for the Best Mortgage Rates
- Use The Good Faith Estimate to Get the Best Refinance Rates
- Compare The Mortgage Lender Fees on Page Two
Deciding up front which types of mortgage loans work best for you makes shopping for the best refinance rates and fees so much easier. If you need the lowest payment that won’t change over time choose a 30-year fixed rate home loan. Do you want to build equity and pay off your mortgage as quickly as possible? Choosing a 15-year fixed-rate home loan gets the job done. The point is decide which mortgage program is best for you and don’t let a fast-talking loan officer quote their best mortgage rates across different programs.
When is the last time you checked your credit reports for mistakes? If you’re finding the best refinance rates lenders are quoting you are higher than what you’re seeing advertised, the likely culprit is your credit. Spend some time reviewing your credit reports for accuracy at AnnualCreidtReport.com. If you want a free credit score with no strings attached check out CreditKarma.com.
Lenders love to quote their best mortgage rates that include discount points first. This fee is pure profit for the bank and does nothing for you as a borrower except separate you from your cash. If you’re curious about how paying discount points affects your mortgage payment there is a table on page three of your Good Faith Estimate; however, as a starting point make sure the best mortgage rates you’re being quoted do not include discount points.
Some homeowners refuse to give their Social Security number out when shopping for the best mortgage rates because they think they’re protecting their credit. While it’s true your credit score will get dinged when a lender runs your credit, you’re not getting an accurate quote if they don’t. The trick to protecting your credit score when shopping for the best mortgage rates is to limit all of your lender inquiries to a 14-day (two week) period. When you do this your credit score will only get dinged for one mortgage lender’s hard inquiry on your credit report.
You already know that it’s important to request your quotes from identical mortgage programs that do not include discount points. Once you’ve got quotes from identical programs start with the best mortgage rates and compare loan origination fees. The less you pay closing on your new home loan the more benefit you’ll get from that lender’s best mortgage rates.
Many loan officers will tell you that one percent is standard for the mortgage origination fee; however, I’ve reviewed community credit unions that charge as little as $400 to arrange your home refi. This loan origination fee can be found on page two, section A of your Good Faith Estimate.
Section B on page two of your Good Faith Estimate are the fees required by individual lenders. You’ll find that closing costs on the Good Faith Estimate vary widely from one lender to the next without explanation. Don’t be afraid to question the fees found on page two of the Good Faith Estimate and haggle with loan officers. If your broker pushes back and refuses to explain the fees that you’re questioning simply move on to the next quote.
Make sure you’re requesting quotes for the best mortgage rates from a variety of banks, lenders and credit unions. Some of the best deals I’ve found have come from those small community credit unions that you might be overlooking when shopping for your home refinance.
Invest some time shopping for the best mortgage rates and fees using these tips and you’ll save thousands of dollars on your next home loan.
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