How to Uncover the Lowest Mortgage Rates
By Peter McDougall
Mortgage rates are in a nosedive right now. Rates have dropped almost a full percentage point in the past month.
You can save a lot of money over the life of your loan if you refinance now or lock in a low rate on a new mortgage. But to get the best rates available, you may have to negotiate with your loan officer. Here are a few tips on where to find the information you'll need to get the best rate possible.
Check online: Each week, manybanking.com's mortgage section lists the national averages for interest rates on the most popular types of fixed-rate and adjustable-rate mortgages. While a dip in the national average may not mean your lender is dropping its rates, it certainly gives you the chance to ask why it isn't following suit.
The mortgage section lets you search by ZIP code to get rate offers from hundreds of local lenders. Nationwide, rates on 30-year fixed-rate mortgages currently average 5.29%, but rate offers vary greatly among lenders. For instance, in the New York metropolitan area alone, rates include interest rate offers such as 5.00% from Webster Bank (WBS), 5.125% from Pathfinder Bank (PBHC), 5.875% from Citigroup (C) and 6.25% from Trustco Bank (TRST).
Shop around: Once you get a handle on rates in your area, find out what rates you’ll actually qualify for. To do that, target at least three lenders offering attractive rates. Ask each for loan information specific to your situation, which includes an interest rate and annual percentage rate (APR) and a good faith estimate of the fees and points they'll charge at closing. Use the same down payment and total loan amount figures for each lender to make sure you have an easy time comparing offers.
When the lenders provide you with their loan information, compare the APRs. The APR takes into account the interest rate along with any points, brokerage fees and other closing costs that you'll have to pay. Points are a way to lower your interest rate, and many low-interest rate offers require you to pay extra points to qualify for the rate. (A point equals 1% of your loan amount and generally lowers your interest rate by 0.125 percentage points.)
Negotiate: Armed with three or more loan offers and knowledge of national rate information, you'll be in an excellent position to ask your lender for the best rates possible. Once you've compared the points and the APRs, ask the second-best lender if they can do any better. If one lender has lower closing costs but a higher interest rate than another lender, ask each to lower their respective rates or fees to beat the competition.
Banks typically have plenty of leeway in the details of a mortgage, and it rarely hurts to ask if your lender can come up with a better deal. Bear in mind, however, that there may be limits to what you qualify for because of your credit or the amount you’re able to make as a down payment.
As with any negotiation, knowledge is power. And manybanking.com can provide you with the tools you'll need to track interest rates and get the most out of your mortgage negotiations.
For more rate offers in your area, go to manybanking.com and enter your ZIP code.