Tips For Locking in the Best Home Mortgage Rate

Tip #1: Always Shop For Home Mortgage Rates

Don’t blindly accept a Realtor or Builder referral to apply for a Home Mortgage through their preferred lender. Many times they will say, “We work closely with this guy and he gets the job done”. Translation: “We play golf together and he buys the beer”. Remember, the Realtor won’t be paying the bill each month for the next 30 years, you will.

Mortgage Loan Officers that work off of a referral network of Realtors and Builders don’t have to have competitive Home Mortgage Rates because they have a steady stream of “Drones” (people who are referred to them and don’t shop) calling them. Shop around, get the lowest cost Home Mortgage Rate, then if you are inclined, approach the “preferred” Loan Officer you were referred to and ask him to match the quote.

If you apply for a Home Mortgage through a preferred lender without shopping, you will pay hundreds or even thousands of dollars in additional costs.

Tip #2: Call For Home Mortgage Quotes After 11:00 a.m. Eastern Time

Mortgage Rates change each day and sometimes midday. The previous day’s rates typically expire by 8:30 a.m. the next morning. Generally, Home Mortgage Rates are published each day by 11:00 a.m. Eastern time. This varies from lender to lender. To make sure you are getting Home Mortgage Rates from the current day and not a mixture of rates from the previous day from some lenders and the current rates from other lenders, always do your rate shopping after 11:00 a.m. Eastern time.

Get all your quotes after 11:00 a.m. Eastern time.

Sometimes Home Mortgage Rates change midday due to a volatile bond market. When this happens, some Home Mortgage Lenders will adjust the Discount Points for their rates in accordance with the new bond prices and publish new Home Mortgage Rates for that day. Other Lenders may continue to honor their morning rates.

Tip#3: Always Tell The Mortgage Loan Officer You Are Prepared To Apply For A Loan NOW

If you are buying a home, tell the Home Mortgage Loan Officer you are Rate shopping and you have a “ratified contract” to purchase a house. Tell him you intend to make a decision and Lock-In a rate on that day, but you have to check a few other lenders. If he asks you how his rates compare to the others, tell him he’s the first person you’ve called. If you are refinancing, tell the Home Mortgage Loan Officer you are ready to apply for a Refinance Home Mortgage today. If you don’t tell him that, he may provide a fake Home Mortgage Rate quote.

Loan Officers know you will probably talk to another lender with lower Home Mortgage Rates and the only way he can be sure for you to call him back is to give you a fake quote that appears to be the lowest. He’s expecting you will rate shop for several days and figures you will call him back in a day or two because he provided a low, bogus rate quote. Also, since Home Mortgage Rates change daily and are subject to change at any time, he’s not concerned about giving you a fake quote.

How will you compare quotes if you don’t know which quotes are real and which are part of a bait and switch plan? The only way to ensure getting real quotes is to box in the Home Mortgage Loan Officers by making them think you are ready to Lock-In a Home Mortgage Rate immediately.

Tip#4: Ask For The Total Points And The Total Fees

When you call a Mortgage Lender, ask for the “Total Points” (Discount Points, Loan Origination Fee, Broker Points) for each Home Mortgage Rate. Some lenders will only quote the Discount Points and deliberately leave out the Loan Origination Fee. You won’t find out about the 1.00 Point Loan Origination Fee until you apply for the Home Mortgage. By that time, the Loan Officer figures you will just accept it because he’s got your application and pulled your credit report. In addition, Mortgage Brokers often neglect to mention their Broker Fee.

Some lenders do not charge a Loan Origination Fee.

When you are quoted the Total Points, specifically ask them if there is an additional Loan Origination Fee or Broker Fee being charged. You truly have to nail this down when you talk to a Home Mortgage Loan Officer.

Also, ask for a list of ALL other fees that will appear on the Good Faith Estimate that you will be paying to the Lender or Broker. Make sure they include their Credit Report and Appraisal Fees. Some lenders charge one lump sum fee and that includes the Credit Report and Appraisal Fees while other lenders will itemize each fee. Keep it simple and ask for all fees, including the cost of the credit report and appraisal fees.

Don’t get confused by Title Company, Attorney Fees or Escrows. A lender will estimate these on your Good Faith Estimate, but these charges are not related to costs associated with a Mortgage Rate quote. The amount required for your escrow account will not change from lender to lender and Title Company and Attorney Fees are not being charged by the lender. Don’t include them in your comparison.

Tip#5: Always Confirm The Rate Lock Period When Asking For A Rate Quote

If you are buying a home and you need 60 days to close, make sure you specifically request Mortgage Rate quotes with a 60 Day Lock period. Some Home Mortgage Loan Officers will quote rates with 15 Day or 30 Day Lock periods because the Discount Points for shorter lock periods are less than rate locks for longer periods. Quoting a Home Mortgage Rate with a 15 Day lock period obviously gives that Loan Officer an unfair edge. It is also a waste of your time because the quote isn’t real if you can’t settle on your loan within 15 days. Always specify a 60 Day Lock-In if you are buying a home. Ask for 45 Days if you are refinancing, but you may be able to get it done within 30 days if you are very diligent and call your Home Mortgage Loan Officer twice a week for a status of your application.

If your rate lock expires, the lender will re-lock you at the higher of either the original rate or the current rate when you decide to re-lock. That’s a LOSE/LOSE situation for you. Never let your rate lock expire.

Tip#6: Compute The Dollar Cost Of The Points And Add All Fees

After you’ve spent some time talking to a bunch of Mortgage Loan Officers, you will have lots of Rates, Points and Fees on a sheet of paper. You will need to compute the dollar cost of the Points (multiply the mortgage amount X the Total Points expressed as a percent; For example, multiply 400,000 mortgage amount X.625% for.625 Points). Then add the dollar cost of the points to the Total Fees. You can then compare each Home Mortgage Lender’s Total Cost (dollar cost of the points + all lender related fees) for a given rate. That will show you which Home Mortgage Lender has the lowest cost Home Mortgage Rates.

If Mortgage Insurance (not to be confused with mortgage life insurance) is required on a Conventional Home Mortgage, ask for the cost per year expressed as a percent and compare it from lender to lender. Some lenders require different levels of coverage and this will affect your monthly Mortgage Insurance payment. In addition, lenders use several different mortgage insurance companies and they charge different rates for their coverage. The lender will select the mortgage insurance company.

The cost of Mortgage Insurance can vary from lender to lender even though most Home Mortgage Loan Officers will say, “We don’t determine the Mortgage Insurance coverage, Fannie Mae and Freddie Mac do”. Your can just say, “Please humor me and provide the Monthly Mortgage Insurance expressed as a percent”.

You will want to check the quoted percent with what is on your initial application documents and final loan documents to make sure the Monthly Mortgage Insurance payment isn’t higher than what you were quoted. If it is, get it reduced immediately. If they won’t do that, then ask them to reduce your Home Mortgage Rate by.125% and that should cover the difference.

If you are getting a government insured mortgage (FHA or VA), you don’t have to get into a comparison of the FHA MIP or the VA Funding Fee. This is a cost you will be paying, however every lender MUST use the same costs, so there is no reason to attempt to compare these costs from lender to lender.

Tip#7: When You’ve Found The Lowest Cost Rate, Apply and Lock The Rate

While you were looking for houses or thinking about refinancing, you may have shopped around and gotten some quotes from lenders and narrowed down your search to the best 5 Home Mortgage Lenders or Brokers. But when it is time to apply for your Mortgage, make sure you update your quotes for the 5 lowest priced Home Mortgage Lenders. After you identify the Home Mortgage Lender with the lowest cost rate, call and apply for the loan. Tell the Home Mortgage Loan Officer you want to Lock-In your Home Mortgage Rate and apply NOW. If the quote has changed since you updated your quotes a couple of hours before, tell the Loan Officer you want him to honor the previous quote. If he won’t do it, tell him you may call back. Then call the next cheapest Home Mortgage Lender on your list. If that lender tells you the same thing, you can go back to the first lender and proceed with the application process.

Before you provide your application information, make sure the Home Mortgage Loan Officer agrees to provide you with an actual Rate Lock confirmation via email or fax on the same day you apply for your loan. When you receive the Rate Lock confirmation, check it and make sure you are Locked-In for the number of required days (30, 45 or 60), with the correct Loan Type (30 Year Fixed, 15 Year Fixed, etc.), with the correct Total Points quoted. It’s normal for a lender to require you to apply over the phone before they will Lock-In your Home Mortgage Rate.

TIP#8: Never Float The Rate

If the Mortgage Loan Officer thinks you might be inclined to FLOAT your Rate and Points, he may say, “I think the rates are going to be coming down, so you might want to FLOAT”. Remember this, never FLOAT your Home Mortgage Rate. Never. Always Lock-In the Rate and Points. If you FLOAT, and the Discount Points for Home Mortgage Rates drop, you will only realize the benefit of a small part of that drop in the Points, if any at all. The Home Mortgage Loan Officer will keep the rest of the savings as a fat commission.

Here’s how they increase their commission when you FLOAT. Originally, the lender quoted 4.875% with 1.00 Total Point when you applied for your loan. Then 45 days later you called to Lock-In. Keep in mind that over the 45 day period that you were FLOATING, the actual Points for 4.875% dropped to.250 Total Points. So you should have saved.75 Total Points on your 4.875% rate. Right? No! First, you don’t know if his company’s points have dropped or by how much they might have dropped. So, instead of giving you 4.875% for.250 Total Points, the Home Mortgage Loan Officer tells you his rates only dropped a little bit. He says you can Lock-In 4.875% for.75 Total Points. You are happy because it is.25 lower than what it was when you applied for your loan, but the Home Mortgage Loan Officer is ecstatic because he keeps half of the “overage” you paid. That overage is.50 points and he splits this with his company. If the mortgage amount was $400,000, he just earned.25% which is an additional $1,000 commission. That’s not bad for a five minute phone conversation.

If you FLOAT and the Discount Points for Mortgage Rates increase, you will pay for the increase. FLOATING is a LOSE/LOSE proposition for you and a WIN/WIN for the Home Mortgage Loan Officer.

Some companies quote very low rates and attract lots of applications, but they don’t let you Lock-In until 15 Days prior to loan closing. If you apply for a Mortgage through a company with that policy, you will get screwed. When it’s time to Lock-In your Mortgage Rate, you will pay an “overage” that will go straight to the Mortgage Loan Officers pocket. You will either pay more points for the rate you requested at the time of application or you will get a higher rate. Either way, you will get screwed and the Loan Officer will get a fat overage added to his commission.

Tip#9: Get a Final Good Faith Estimate Several Days Before Loan Closing

Get a copy of the Final Good Faith Estimate at least a few days before the scheduled closing day. Check the Mortgage Rate, Points, Fees and Monthly Mortgage Insurance Premium (if applicable). Make sure you are getting exactly what you bargained for. Ask questions if you don’t understand something. Demand that previously undisclosed fees be removed from the Final Good Faith Estimate. Make sure you get a revised estimate if the Mortgage Loan Officer verbally agrees to make changes.

The day of loan closing is the wrong time to haggle over discrepancies.

Save Thousands With The Right Home Mortgage Advisor

If you are thinking of buying a home and are in the market for a home mortgage, you’d better start doing your homework right now. The reason is pretty simple – things have changed and the days of easy home mortgages are gone.

Getting mortgage money was relatively easy just a few short months ago. That was When house prices were steadily rising and homes were selling practically before they were listed. But that was then and this is now. Things have cooled off a lot, and with a slow down in the real estate market has come higher interest rates along with tougher conditions for getting mortgage approvals.

Perhaps most important, interest rates have been rising slowly for a number of months. This may not seem like a big deal if you are new to the home buying market. But on a large home mortgage even a small interest rate increase can make a very big difference to your payment.

In most cases the interest rate can even make the difference between being accepted or rejected for a home mortgage. That’s because in order to qualify for a home mortgage your ability to afford the payment is one of the most important criteria for getting approval. And a higher interest rate could easily put the payment out of reach.

**Find a home mortgage advisor**

Before making home mortgage decisions you should find a professional advisor who has a lot of experience in the home mortgage business. Often the best advisor is a mortgage broker not directly affiliated with any one lending institution. The best advisor has in-depth experience and current knowledge of real estate and mortgage trends. This kind of mortgage advisor also can make use of many different sources of mortgage funds.

Often your best choice will not be your regular banker. Banks almost always recommend their own products and are not very interested in suggesting other products – even if they are a better deal for you.

Look at it this way: if you have a good credit rating you can probably get a better deal than the one your bank is prepared to offer. On the other hand, if you have credit problems or need some creative suggestions, you’ll probably not get them from a bank. They want you to conform to their requirements and rules.

Yes, a bank is fine if you aren’t interested in getting a better deal. However, if you want alternatives or creative suggestions you’re better to go elsewhere.

But where should you go? You should start by looking for a home mortgage advisor who is not tied to any one financial institution, someone who knows the market from the inside and who has access to many different sources of mortgage funds.

**Good deals are still available**

Even when credit starts tightening up there are ways to get a good deal on a home mortgage. Sometimes these good deals involve government backed loans such as FHA loans. These loans exist to help people with even horrible credit to borrow as much as 97 percent of the value of their home. The primary requirement is that they have the necessary income to make regular payments.

People who might not otherwise qualify are given a shot at home ownership by mortgage plans like these. That usually makes them a very good deal for many people. But many traditional lenders will not recommend them because there is not enough profit in it for them. Some traditional lenders are not even aware these alternatives exist.

In fact many mortgage brokers won’t recommend these loans either because they take extra work. However, from your point of view it is really worth finding a mortgage broker who will find the best deal for you. It could save you literally thousands of dollars over the life of your mortgage, and it could make an otherwise impossible mortgage a reality.

**An ARM can be a good short term solution**

Another mortgage possibility is called the “option adjustable rate loan” – commonly referred to as an ARM. Many people took advantage of this approach in the most recent real estate boom. If you qualify you could pay as little as 1% interest against a “real” rate of about 7.25%. To qualify you need a very good credit rating and good prospects for the future.

But beware. The unpaid interest is added to the principal of your loan, so the amount owed actually goes up over time. That means an ARM loan must be used very cautiously because a home owner can end up owing more than they can afford to pay.

But this approach does give a borrower the option of making drastically reduced payments for a short period of time. It is used most often when a person has serious short term cash flow problems, or when they foresee their financial situation significantly improving a year or two in the future.

**Make the right mortgage choices**

While these days qualifying for a home mortgage is more difficult, and affording a home mortgage is more expensive, there are still ways to save money – especially when your advisor can bargain between a number of different money sources. To find these deals it is very important to find those sources. That is why it is so important to deal with an experienced professional advisor you can trust. This person will have in-depth knowledge of the current home mortgage situation and be experienced in dealing with situations like yours.

The best advisor is a broker with years of experience and hundreds of different lenders to draw on. That kind of broker can find an affordable mortgage for almost everyone.

Benefits of a VA Home Mortgage Loan

When it comes to applying for a mortgage loan, there are many different types of programs. With the many different loan programs available, it is important to choose the best program for your particular mortgage needs.

One of the home mortgage programs you can choose from is a VA loan. This type of program is designed for veterans to purchase a primary residence or refinance an existing mortgage loan. Below are the many benefits to the VA home mortgages.

No Down Payment

A VA mortgage offers veteran buyers a program with a zero down payment. This means the loan will equal the sales price or the appraised value of the home. The VA mortgage loan program permits veterans with qualifying income and credit to acquire a home without a down payment towards the sales price of the home. On the other hand, Veterans do need money towards closing costs, which the seller can assist the buyer with.

Seller Concessions

VA loans allow the seller to contribute up to 4% towards the buyers closing costs. This is exceptionally important in helping a veteran purchase a new property and reducing the amount of money needed for closing. For example, if a buyer purchases a property for $100,000 the seller can contribute $4000 towards the buyers closing costs. Seller concessions can pay pre-paid items, title fees, mortgage company fees as well as the VA funding fee. The veteran is not allowed to pay for the termite report, which is generally paid by the seller.

Reduce Rates

For many veterans, VA mortgages offer the most competitive rates. VA mortgage loan rates are not tied to the credit scores the way conventional home mortgage rates are. For example, if a client has a credit score of 660, on a VA loan the rate would be the same if their credit score was 780. However, on a conventional home mortgage, the credit score of 660 compared to a 780 would see an increase in the rate.

Mortgage Insurance

Another big benefit in the VA home mortgage program is there is no Mortgage Insurance. Unlike Conventional mortgage loans and FHA mortgage loans, VA mortgage loans do not charge monthly mortgage insurance. This is an average savings of anywhere between $30 a month to $200 a month, depending on the size of the home loan.

Mortgage Loan Size

VA mortgages do have a set loan limit. To determine the loan limit in your area, contact your mortgage officer. For example, the Dallas – Fort Worth area VA loan limits are $417,000

With many different types of mortgage loans, it is important to understand all your options. For a veteran, VA mortgages are a great way to purchase or refinance a home. It is always important to understand the benefits of each home loan program that you qualify for and to make sure you are getting the best possible mortgage loan. Consult a mortgage professional to see which program is best for you!