A Step-By-Step Guide for Finding the Best Fixed Rate Mortgage
Written by: Martina Hargrove
Finding the best fixed rate mortgage doesn't have to be an exhaustive search filled with confusing financial terms and jargon. Using this simple, step-by-step guide, and educating yourself about this particular type of loan, you will be able to find the best rates, along with the lowest monthly payment possible.
Learn About Fixed Rate Mortgages
With a fixed rate mortgage loan, the principal, interest, insurance, and assessments all remain the same throughout the life of the loan, everything except for the taxes. For those that plan on staying in their new home for many years, a fixed rate mortgage is the wiser choice, as opposed to an adjustable rate mortgage (ARM), which feature varying interest rates depending upon the current index rates, and the length of the loan.
The two basic types of fixed rate mortgages are:
- A 15 year fixed rate mortgage
- A 30 year fixed rate mortgage
Find the Best Lenders
Compare rates from various lenders in your area, as well as their different fees and discount points, which is what you are charged by the lender for the privilege of getting the loan. Usually, the best fixed rate mortgage will be accompanied by the highest fees. Many borrowers make the mistake of only looking at the lender's interest rates without also figuring in the cost of the additional fees.
Narrow Down the Choices
Narrow down your choices of lenders to the top three or four offering the best rates and deals. If you've been pre-approved by any of the lenders, they should be high on your list of possibilities. It's also a good idea to ask friends, family, and co-workers what their experiences have been with their lenders, and see if they recommend any specific mortgage company.
Obtain Personal Quotes
For personal quotes, contact your list of lenders and give them honest information in order to obtain the most accurate number. Factors such as the amount of your down payment, your current debts, your credit and employment histories will all be taken into consideration, as well as the lender's fees, discount points, and of course, their interest rate.
Apply for the Mortgage
Once you've decided on the lender that offers the best deal, combining price along with service, you can then go about applying for the loan. Be aware that the majority of lenders today charge a non-refundable fee that usually ranges anywhere from $200 to $500.
Also be prepared to provide documentation regarding your income, any savings you may have, your debts, bank statements, as well as your paycheck stubs, and any other documents that are required by the lender. You will also need to show proof of having homeowner's insurance that will be effective the day the loan closes.
Receiving the Commitment Letter
The sales contract will list a deadline date, which is generally anywhere from a week to 10 days before the final closing on the house, on which the final approval must be met. Remind the bank or lender about the date, and once you have approval for the loan, a copy will be given to the real estate agent, if any, as well as the seller of the property.
