Finding the Lowest Home Loan Rates
So how do you go about finding the lowest home loan rates? And how can you tell if the quote you have received is good, average or high? Here’s a quick primer on home loans and rates, including where to find the best ones.
Home Loans 101
There are two basic kinds of home mortgages, and they are called fixed-rate and adjustable-rate (also known as variable-rate). It’s important that you know the difference between the two before you shop for your mortgage.
With a fixed-rate home loan, you are charged one interest rate that lasts for the life of the loan, however many years that may be. If your interest rate is 5% (for example), it will never go higher or lower than 5%, no matter if interest rates go lower or higher.
An adjustable-rate home loan is the opposite; your interest rate is tied to the Federal Reserve rate, and it will adjust along with the Fed. So should interest rates dive, you’ll get an adjustment down on your interest (and therefore on the payments). However, the reverse is also true; if interest rates climb, so do your mortgage, meaning your payments go higher.
Adjustables tend to be the lowest home loan rates initially; the introductory amount is generally lower than a traditional fixed loan. However, there is no guarantee that it will stay low. And if the Federal Reserve rate goes up substantially, you may find that you can no longer afford your house payment.
Where to Find the Lowest Home Loan Rates
Now that you understand the basic types of mortgages available, the next question is to where to find the lowest home loan rates. Mortgages are offered by banks, home loan organizations, credit unions and more.
Your first option is to check with the bank where you do business, as well as with any credit unions to which you may belong. If you are already a customer, you might be able to get a little better rate than a non-customer.
Next, check around online, and you’ll find sites that will provide a rate quote. They will show the lowest home loan rates on their site. Then, by filling out an online form, your name and phone number will be given to between 3 and 6 mortgage brokers, who will call you for additional details, as well as to answer your questions. It’s one of the easiest ways to search for the lowest home loan rates, since you’re filling out only one initial application.
Obviously, the lowest home mortgage rates are given to the people with the best credit scores, so if yours is less than stellar, don’t expect a super-low rate. However, if you want to become a proud homeowner, you’ll need a mortgage. With a little perseverance, you can and will find the lowest home loan rates.
Fixed Home Loan Rates
You’re getting ready to buy a home, and are wondering about fixed home loan rates, compared to their variable-rate cousins. And actually, you may not be quite sure what a fixed-rate mortgage entails in the first place! Now to worry, you’re about to learn about fixed-rate mortgages and where to find good loan rates.
What is a Fixed Home Loan?
You’ve heard the term before, but before you apply for this type of financing, you’d best know what is being discussed. So here you go, a quick overview of home loan financing.
A fixed loan is one where the interest rate is locked in for the life of the loan. So, for example, if you negotiated a rate of 5%, that interest rate will stay at 5%. It doesn’t matter if interest rates fall further or rise above, your loan interest rate will not change.
There is one thing to be aware of, however; a fixed home loan rate does not mean that your mortgage payment won’t fluctuate from year to year. That fluctuation you may see has to do with the cost of homeowner’s insurance and property taxes, not with your home interest rate.
What is a Variable Loan?
No discussion about fixed home loan rates would be complete, however, without a quick discussion of variable-rate loans, which are also called adjustable-rate mortgages. Variable-rate loans are those whose interest rate fluctuates over time, and these fluctuations are based on the Federal Reserve rate. Typically, an adjustable loan offers a very low initial interest, which then rises and falls depending on what the “Fed” does with rates.
If you should ever decide to go this route, be very sure there is a reasonable cap rate (where the interest cannot rise more than the cap rate each year). With the last housing bubble, many people got caught out with variable interest rates that went through the roof, and they lost their homes. And it’s partly because of this that fixed home loan rates are gaining in popularity.
Finding Fixed Home Loan Rates
Congratulations on choosing a fixed-rate home mortgage! Now that you’ve found a home and decided on a mortgage type, it’s time to go loan shopping. And it’s actually not as daunting as it might initially seem.
The first place to check for fixed home loan rates is online, and a good idea is to find a site that offers competitive rate quotes. In other words, you fill out one form and several companies (generally 4 or 5) will contact you regarding a quote.
With those fixed home loan rates quotes in hand, you can also go around to any local banks or lending organizations and see if they can offer fixed home loan rates that are any better. And obviously, make your first stop your own personal bank. They may offer a better rate since you are already a customer.
See, it’s not so difficult!
Refinance Home Loan Rates
You’ve got a home with some equity, and are wondering about refinance home loan rates. You could use the extra cash, sure, but you also want the best deal you can get. Should you wait and see if the home loan refinance rates go lower…or are they on the rise again?
Should You Refinance Your Home?
This is the first question that you should be asking yourself, and that is should you be refinancing your mortgage? It can make sense if you’re just wanting a lower interest rate, or you can get a good drop in your monthly payment. But are you also planning on using some of the equity in your home to get extra money?
If you want extra money with the refinance, would the money be used to pay off credit cards or reduce other debt? Do you plan to use the money to renovate the house? Or do you want to plan a vacation of a lifetime with the extra cash? These days it pays to be extra-careful when it comes to a home mortgage.
What Kind of Home Mortgage?
Once you’ve made the decision to refinance your house, you’ve next got to decide upon the type of mortgage you want. After the housing bubble burst a few years back, fewer people are seeking a variable rate mortgage and are moving towards a fixed rate loan.
The next item to consider is how long a time period do you want for the refinance? The two most popular numbers are 15 years and 30 years; which you choose will depend on your personal circumstances. However, 15 year mortgages tend to have better refinance home loan rates than do 30 year mortgages.
Refinance Home Loan Rates
You’ve decided on a home refinance, and are debating between a 15 year term and 30 years. Your credit score is reasonably good, so where do you start looking for home loan rate information?
The internet is the first place to search, to get a general idea of home loan refinance rates. Keep in mind the advertised low rates generally apply to someone who has an excellent credit score, but it does give you a basis for comparison.
If you’ve had a good relationship with your current lender, you might want to ask them what refinance mortgage rate they can give you. Many times when they know you are “shopping around”, they will offer you a rate incentive to stay with them.
Refinance mortgage rates have dropped a great deal in the last couple of years, but there is no guarantee that the rates will remain low. If you’re serious about seeking to borrow the money, refinance home loan rates may not get any better.