Is It Best To Shop Around For The Best Mortgage?

Is it best to shop around for the best mortgage? Always shop around for the best mortgage rate because all lenders may carry different fees. Taking the time to shop around for the best mortgage is a wise...

Taking the time to shop around for the best mortgage is a wise investment of time and energy. Finding the best financing deal is a simple process of research and comparison.

Acquiring a mortgage is similar to acquiring any other product that you would purchase for either your home or yourself. Many lenders offer mortgage loans and therefore, terms, rates, and costs will vary considerably.

Stephen Edwards of Waterfield Financial Company, the nation's largest privately owned mortgage company, reinforces this concept by saying, "Rates are going to vary." In fact, interest rates may vary on a daily or weekly basis, so it is important to check on them frequently.

Additionally, the borrower needs to be aware that lenders charge other fees on mortgages. Edwards says that the lenders may not always tell the borrower upfront about these additional fees. He says, "There are fees called points." Lenders often charge between one and three points for mortgage loans. Edwards explains, "One point is 1% of the loan amount."

Therefore, not only does the interest rate make a difference, but also, the number of points charged on the loan makes a difference in deciding which is the best financial option available to the borrower. The larger the loan, the greater the impact the number of points will have on the cost of the mortgage loan to the borrower.

Edwards offers an example for clarification purposes. "One thing that could happen is that you have ABC lenders offering an interest rate of say 7%. XYZ vendor is offering a rate of 6%." For comparison purposes, assume that the term, or number of years the loan will be in place, are the same.

Edwards continues, "On the surface, the buyer will think 'hey! You know I am going to go that way because they have a lower rate.'" However, lenders charge points to the borrower in order to receive the lower interest rate. Edwards says, "So to get $100,000 of loan at 6%, they [the lender] may say it is going to cost you two points. Right off the bat, that translates to $2000 for the 6% rate."

"Even though they are better on the surface," says Edwards, "the interest rates may be different." The borrower needs to consider the additional fees that are being charged. If the additional cost of paying points is too high, the lower interest rate is no longer going to reflect the better financial deal. Edwards advises the borrower to remember, "You really need to work out each lender's rates and see what their fees are."

Shopping around for the best mortgage loan involves shopping around for the best interest rates and involves shopping around for the fewest points charged. Tell the lenders that you are shopping for a loan with the best overall terms, including the interest rate and the fees that are charged. Some lenders may have a bit of leeway to negotiate a better deal with the borrower. To answer whether or not you should shop around for the best mortgage, Edwards responds with a very clear, "Yes!"

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