What is the best method for mortgage loan interest rate shopping?

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I have been pre-approved for a mortgage loan, but have been told the interest rate cannot be determined until a contract has been signed for a house. If this is true, then how is it possible to shop around for the best interest rate available based on my credit scores other personal information? I don’t want to settle for the first mortgage lender (referred to me by my real estate agent) without shopping around for others who may be able to beat their interest rate.

  1. Reply
    April 30, 2011 at 11:39 pm

    You need other offers.
    When I was pre-approved I went to three institutions.
    One gave me a floating rate (no guarantee)
    The other two locked in ( I think it was 60 days).
    The locked in rate was slightly higher.
    But I could make my choice of mortgages at the last minute.
    Continue to search your banks and don’t forget your local credit unions.

    Note: Inquiries only affect your score by 1 or 2 points.
    All inquiries of a similar nature in a 3 week window are grouped as one.
    To top it all off, major lenders don’t focus on the score.
    They will view your reports in detail (line by line) and make their own decisions.
    They don’t worship that three digit number.
    Neither should you..

  2. Reply
    April 30, 2011 at 11:57 pm

    No lender can guarantee they will have the best rate all of the time and calling for quotes before you are ready to lock is basically worthless. Since rates change even throughout the day it is also easy to find websites with what seem to be low rates, only to find with further investigation that the actual rate is not current or requires much higher fees to get.

    There is nothing wrong with shopping around and if multiple mortgage lenders pull your credit in the same month it has the same effect on your score as if it were only one pull. Eventually you are going to have to trust someone to properly handle a very important transaction. Ask someone you trust who has had a good experience with a lender to refer you to someone who will earn your trust by listening to what you have to say and answering all of your questions. If you need to talk to more lenders to get comfortable go ahead. Remember not all transactions are vanilla, and there is much more than the rate to consider. There are interest rate and PMI rate adjustments based on credit score and not all lenders have the same adjustments. The lowest rate means nothing if you pay more for PMI, or if your lender can’t get it done by your contract date or even at all.
    All rate locks have expiration dates and the longer they are the higher your rate will be. You need an accepted contract to determine how long your lock period needs to be. You want to lock for the shortest period necessary to get you through closing, but allowing for an extension that won’t break you or cause you to lose your rate if some uncontrollable event like a blizzard or human error delays your closing.

    As a broker I monitor our rates and those offered by the competition daily because I know how easy it is to go across the street to the other guy. Also remember on a $ 100K loan a 1/8% difference in rate means just $ 7.61 per month. First make sure they have the best program for you and that they can get it done.

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