Most people are aware that each of their monthly mortgage payments includes two parts, namely a portion that is assigned to repay the principal of the loan (that is, the money you’ve borrowed) and a second portion that is assigned to repay the interest.
Mortgage interest rates change on a daily basis. Before locking into a rate, make sure you’ve checked the current rate. Check the weekly rates and see if the interest rates are trending up or done for the week.
Longer-range forecasts (and remember that forecasts are simply educated guesses) are often included in business reports in the press.
While the vast majority of lenders are looking out for your best interest, you do have the responsibility to make sure that you’re getting the best loan you can get. Part of that responsibility is the simple comparing of rates. You will find unreputable lenders who may try talk you into mortgage fraud. This is unacceptable!
If, for any reason, you feel that a lender is taking advantage of you, you do have rights. In fact, much of the reason that the mortgage process seems so complicated is that there are many laws, regulations and requirements that must be adhered to, most created to protect you, the consumer.
As you discuss your options among different mortgages, there are other conditions and terms that you should keep in mind. Most importantly is how and when the actual rate you will pay is determined.
Most lenders will quote a rate and fee at the time you apply for the loan, and then guarantee, or lock, the quote for a certain time. While this lock protects you from paying more for your mortgage if interest rates rise, it also means you will pay the quoted rate even if interest rates fall.
Lock periods usually run from 10 to 60 days. Longer periods are sometimes available for an additional fee. You will want your lock period to be long enough to get you through closing and settlement.
Some lenders give you the option of letting the interest rate for your mortgage float, so the rate can change between the time you apply and the time you close (the rate is usually set after some specific period, but before the actual closing).
You may be able to benefit from reduced interest rates through a float if interest rates fall between the time of your application and closing. But before you choose a float, make certain that you have the resources to cover a higher monthly payment if interest should go up. Otherwise, you could be denied your mortgage.
You should understand all the terms of the mortgage you choose, so you won’t
be surprised down the road.
That’s why it is critical to choose a lender who makes you feel comfortable and welcomes your questions. Mortgages are complicated financial transactions – but lenders are experienced in explaining all of their ins and out to home buyers like you.