How to get cheapest mortgage rates?
- 1 decade agoBest Answer
First of Xander; it is quite the opposite. The cheaper the home the higher, and in some cases harder, to get mortgaged. Banks want to make money, and they can’t if they mortgage a $40,000 home, and in order to mortgage it and make money they will need to charge large upfront fees and a pretty hefty interest rate.
Next, Minda, don't over concern yourself with interest rate. First find yourself a program that best suites what you are trying to do with the house. If this is your first home, the likelihood that it will be your last is pretty slim. So think about doing an interest-only loan for 5 to 10 years fixed. This will greatly reduce your monthly mortgage payment and will remain constant for the term you choose.
I highly suggest against doing any type of loan that includes reverse mortgage. As delicious as those 1% introduction rates are, they are bad news, so stay away. Try to limit yourself to interest only, and no less, that way even though you are not paying down the principle, you are at least not going backwards.
Next, focus on the deal. For every $100 you get the price reduced, you will be saving yourself around $7. Doesn't sound like much, but a simple reduction of $5000 saves you about $30 per month. And, if you shop for great houses in great areas that have been on the market for a long time (90+ days), I bet you can find an even better deal.
Bottom line, there are many factors into creating a great deal. Many more than just the mortgage rate. Look at the whole deal, and ask yourself if you think you are getting a great deal. If you don't think you are, then you probably aren't. Almost everything in real estate is negotiable, don't forget that.
I will just add something here to rebut Mark G's response to my suggestion of the interest-only loan. Having a 15 or 30 year fixed conventional loan does not mean that you will own the property any faster. Let me say this, if having an interest-only loan affords you the opportunity to buy a better home, isn’t that the house you want to own? Its appreciation will probably go up faster than one that is not as big or as well located. And, if this is not going to be you final home, why give more money to the bank, in the form of mortgage payments, than you need to. If, for about the first 10 years you are paying between 80%-90% interest anyhow, what does it matter if you pay a couple of bucks to the principle. Would you rather not save that money instead, in case of rainy day? If you've owned homes as I have, it never fails. Something comes up and you need money for it. Is your bank going to give you back the money you gave it, so freely? Heck no, they will charge you to take the money out, and then they will charge you a higher interest on it as well. So why give them more than you need to. Next, if you saved a couple of hundred bucks every month, you could put that money away in a savings, and with enough discipline, you could buy a second, third, forth, fifth home as an investment, or invest into some stocks or any other thing that will give you a return greater than your 6 or 7 percent, and there are plenty to choose from.
Now I want to set the record straight. I am not promoting or suggesting you get an interest-only loan, I am suggesting you don't get anything worse than an interest-only loan.
I’ve owned many homes, and still own many homes, I’ve owned home free and clear, and I’ve mortgaged myself 100%. Every mortgage fit the situation I was attempting to achieve. However, there is a realization that you must confront; if you live in the US, you will never fully own your home. You will still have to pay taxes, and if you are smart, you will still have to pay insurance. The myth of owning your home is from the good old day, when our grandparents used to pay large sums of cash to buy their home. That doesn’t exist any more. Even the wealthiest of the wealthiest, keep leveraging themselves over and over again to keep getting richer. There are no real advantages to owning your home fully outright. Why tie up $200,000 in owning your home, and when you need that money, you have to pay to get it out. It ludicrous.
Lastly in regard to preparing for the next one (home, I’m assuming), how many years will it take to make a dent into the principle of that loan, before you’ve made enough to make a decent profit. Even though you are not paying down the principle with your interest-only loan, the appreciation is going to take care of the equity in your home. Buying a better house, a bigger house will appreciate just as fast if not faster than the other house, except the percentage translates into bigger cash in the homeowner’s pocket. And, with the markets as soft as they are right now, why not try to buy as many houses as you can respectfully. If the appreciation is going to be there in 3-5 years, when you are ready to refinance; with all the money you could have saved and reinvested, you could own 5 or even more homes. Refinance a few, maybe sell a few, do whatever you want, but the result will still be astronomical than if you had spent every dollar on that one smaller, cheaper home, just because you finance incorrectly.
I do agree with one thing you said, buy within your means. But the advantage of an interest-only loan is that you don’t have to put a bunch of money down, and for the same reasons as I stated above, it’s ridiculous. The potential homeowner needs to remember that once the property is bought, they are fully responsible for the upkeep and the payments of the mortgage. If a full PITI payment is $1500 per month and an interest-only payment is $1000, and assume something happens where they need some money, would you lend it to them if they called you with their problem and you has sold them that house? If they lost their job, how easy do you think it would be to refinance, without any job verification, even going stated. Yeah, it would still be difficult to come up with the mortgage payment, but last time I checked, getting $1000 is easier than $1500. But I guess you could rest assured, after all owning that home is what matters, it’s not like the bank is going to want their money or anything like that. Oh wait, yeah they will, and how will that pride of ownership feel when a auction is taking place at your front door and people are bidding to buy your house and put you out on the street. Think about that.
- Mark GLv 41 decade ago
I could not disagree more strongly with answer that suggests an interest only loan. One of the great advantages of home ownership is the building of equity in your house. It's like a savings plan that lets you use the investment (your house) while you're doing it. She's right, it's probably not the last house you will buy, but an interest only loan does nothing to help you prepare to buy the next one. By creating equity in this house, you will have more available money to buy the next one, and, if things go as I'm sure you hope, your next house will probably cost more than this one. All the more reason to build equity to have more cash to climb the property ladder.
The other thing an interest only loan does is encourage people to buy more house than they should. DON'T FALL INTO THAT TRAP. Buy within your means, put as much money down as feasible, and go with a fixed rate mortgage if you can. An ARM is cheaper initially, but can end up being much more expensive. So if you go that way be very careful. With fixed rate interest rates as low as they are now, every prudent person should try to go that way.
To compare rates on a loan, look at the APR, not the interest rate they use to advertise the loan. The APR gives a much more accurate picture of the true cost of the loan. Pick out several that look good. A good resource for this is Bankrate.com Then, call the people who offer the loans you've selected, prequalify with them to see what rate you actually qualify for based on your circumstances (credit, income, debt) and ask for a sample good faith estimate. That will give you all the costs of the loan, including closing costs. Do this with several lenders for the same loan amount so you can easily compare the products. Now you will know: how much house you can buy, what upfront costs you will have, your monthly payment (or close to it) and closing costs. Those closing costs can be paid by the seller, by the way, so you can use that when you offer to buy the property.
The problem with the logic of letting appreciation take care of creating equity in a home is that houses don't always appreciate. Here in Florida where I live, the area is experiencing one foreclosure after another from people who counted on that trend continuing forever. Yes, there are many stategies for investing in real estae, and some of them involve interest only loans. I, too, have used such a stategy with investment properties. But, unless you're knowledgable about such things, simpler is better. The idea of owning a home free and clear still would not be a bad thing. Even in the case that that never happens, building equity in a property still makes sense. You can do that with an interest only loan by paying against the principal yourself, but that requires more self-discipline than most people frankly have. Otherewise, by definition, an interest only loan means that all you are doing in making your monthly mortgage payment is servicing the debt on the house. You never pay it off or even reduce the amount you owe on it. To say that an interest only loan does not change the amount of time it takes to pay off the house defies mathematics. I'll not dispute the idea that interest only financing,and various other strategies can be effective. But for most people who simply are trying to buy a primary residence, especially inexperienced people, they are simply creating additional risk that is unnecessary.Source(s): Real estate agent/home rehabber
- Anonymous1 decade ago
Rate is only one component of choosing the right loan for your personal needs and goals.
We in the mortgage industry have done the public a great disservice in the last 15 years by throwing rate in your faces so hard that you all think it is the only important factor in your choice of a lender and loan program.
It doesn't matter if someone promises you 1% if that isn't what you get at the closing table, if you pay too much to get it, if it is the wrong program for your need, or if you are half nuts by closing.
Shop for a loan officer you can trust as you would a physician or your child's care provider and let them educate you so that you understand all of your options and can make informed decisions. It is, after all, YOUR LOAN!Source(s): 20+ years as a direct mortgage lender
- Anonymous4 years ago
The only advice I can give is to definitely shop around. I just refinanced my home, and most of the companies I researched had rates that fell in the 6% range for a 30 year fixed. However, I found one company that offered 5% for a 30 year fixed loan, with only $2,800 in closing costs. Just find a reputable company with a great rate and low fees.....they are out there. You just have to shop around.
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- 1 decade ago
The only real way to ensure a cheap mortgage paymeny is to buy a cheap home. Make sure you do you're homework before signing one of those interest only ARMs I know of a couple that got the loan at 6.5%... The ARM moved to 25% after two years and they lots their home.
- Anonymous1 decade ago
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Just mail me at email@example.com with subjet- Mortage Loans. I will send a link of best website where you can find best Loan offers,tips and resources.
- 1 decade ago
If your credit is good, and you have strong income, then get educated! Empower yourself with the right information, shop alittle, and ask a lot of questions. Get quotes in writing, and don't be the one blaming the lender if you get taken advantage of. You can only get screwed if you let yourself!!Source(s): www.acgmoney.com
- DudeLv 51 decade ago
By making sure you have great credit! Check your credit score for errors, get them corrected if you find them. The higher your score, the better the rate you can demand.