4 Mortgage Rate Shopping Tips

Mortgage rate shopping can pay off for you in lower interest rates, lower monthly payments on your home and a lower total payment over the life of your loan. Whether you need a traditional fixed-rate mortgage or a home equity loan or you’re even looking for bad credit mortgage rates, the following tips will help you find the best rate for your financial circumstances.

Know and Repair Your Credit Score

Begin mortgage rate shopping by preparing yourself to get the best rate you can after you have shopped. You do this two ways:

Know Your Credit Score - Everyone who borrows has a credit report on them that yields a credit score. Lenders report any negative activity, such as a late payment, to credit bureaus, the three biggest of which are Experian, Equifax and TransUnion. You are entitled to a free look at your credit report each year. If you have already used your free look, it only costs about $30 for another report. 

Repair Your Score - About 70 percent of credit reports contain at least small mistakes. If there are errors you can document, write the credit bureau, enclose a copy of your documentation and request they fix the problem. They must acknowledge your letter within 30 days. If you have a valid claim, the bureau must contact the lender in question and resolve it. If the matter is resolved in your favor, you also receive a free copy of the corrected credit report.

National Trends, Local Rates

The housing market is cyclical. When home prices are falling in your region, interest rates trend lower as well. When home prices are rising, interest rates trend higher. When demand is high and interest rates are rising, lenders compete more aggressively for your business and will offer a variety of loan products beyond traditional mortgages - zero-down, 80/20, even 50-year mortgages. When home prices are declining, your good credit is what will attract lenders. Begin shopping for rates by being familiar with national trends.

Know your local rates as part of that larger national trend. Local rates typically are posted weekly in local newspapers. But most lenders will advertise their mortgage rates with signage at their location. If not, they’ll gladly tell you if you ask.

Know What You Want

There are a variety of mortgages for a variety of need. First-time home buyers have many low-interest programs targeting them. If you have cash and can get an 80 percent loan, you save on mortgage insurance and are a better risk for the bank. Refinancing has its own set of rules. Know the type of mortgage you need before going mortgage rate shopping.

Begin Shopping Lenders

You can compare rates online, but that doesn’t mean it’s your best rate. A lender who knows you might make a deal for a better rate. A mortgage broker who works with numerous lenders might be able to find you the best rate. Begin mortgage rate shopping by shopping for lenders.

You’ll get your best rate if you know and repair your credit score; know the type of loan you want; and know the type of lender with whom you want to deal.