De-Mystifying Mortgage Rates

mortgage rates
Shopping around to different lenders to find the perfect mortgage is crucial. As mortgage brokers, we’re here to do the shopping for you, but it doesn’t hurt to have some shopping power! Here are a few tips and tricks when looking at mortgage rates.

Rates are important, but they’re not everything. 

Oftentimes lenders will advertise an extremely low rate that seems too good to be true. That’s because it usually is — OR they’re charging lots of ‘points’ (A.K.A. extra upfront fees) for this rate. Always look at the fine print to see what kind of scenario they are basing their figures on. Just because one borrower gets a certain rate, doesn’t mean that rate is an option for every borrower. Other times the rate will also only be locked for as low as 7 days, which is of no real value when most contracts take longer than that to execute. And lastly, just because you get a low rate, doesn’t necessarily mean that you will save money in the long term. Make sure to thoroughly vet any spectacular rate claims.

Mortgage rates and APR are different.

Another strategy you’ll see some lenders try out is advertising a low interest rate, but a high APR in the fine print. Many consumers don’t realize that means there are hidden fees that they aren’t telling you about. Lenders are required to provide the APR (Annual Percentage Rate), which considers the other fees associated with your loan. However, lenders calculate APR differently, so it’s not the only metric you should rely on. 

Low rates have caveats. 

If you see a lender advertising an extremely low rate, chances are there are some shenanigans going on behind the scenes. There are plenty of workarounds to get a borrower down to a low rate, but that usually means you end up paying more upfront. This could be through mortgage points, a larger down payment, or a combination of both. The length of the loan, your down payment, your credit history, and many more factors influence what kind of rate you get. Make sure you do your research on the lenders that you are considering borrowing from. The internet is a great resource for vetting businesses. Your mortgage is one of the biggest financial decisions of your life, so don’t take it lightly! Contact us today for a free consultation. 

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