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When you are buying a home and applying for a mortgage loan, locking in the best possible mortgage rate should be a top priority. There is generally nothing more important than having a lower interest rate for your home loan. This is true whether it’s a fixed-rate vs. adjustable-rate mortgage (ARM). Your mortgage rate will make a difference no matter what type of loan program you are using to fund your home purchase (Conventional, FHA, VA, USDA, Jumbo, etc.).
Comparing Lenders and Mortgage Rates
It is always a smart idea to shop around. Talk with multiple mortgage lenders and explore different loan options. The right mortgage solution for another home buyer may not present the best outcome for you. There are so many factors lenders will consider when determining your final mortgage rate. Each borrower’s situation will be unique.
Online Mortgage Calculators
If you want to get a rough idea of what kind of mortgage rate you can qualify for, you can use online mortgage calculators (click here for the Moreira Team Mortgage Calculator). However, these will only be able to show you a limited amount of data. These mortgage calculators use average rates and average borrower qualification standards. As we said, they can provide you with a very rough idea of your mortgage rate and estimated monthly mortgage payments based on the amount you wish to borrow and a few basic qualifying factors.
Some mortgage calculators will offer more fields to fill out that can help you narrow down the projected interest rate. They may ask for the loan amount, your income, the loan type, your estimated credit score (FICO score) and a few other details about your financial situation. These may be able to provide you with a slightly more accurate mortgage rate estimate, but again there are limitations.
Be very careful when filling out online forms, especially if they ask for your name, address, phone number, social security number or any other sensitive personal information. You are better off contacting the mortgage lender directly to get a proper quote.
Mortgage Pre-Qualification vs. Mortgage Pre-Approval
Another great recommendation is to get pre-approved by a reputable mortgage lender. You may even opt to get pre-approved by multiple lenders as you shop around. A simple “pre-qualification” might be able to give you a basic idea of your qualification standards and how much you can borrow. However, it will not really give you any buying power. A mortgage pre-qualification is based on very little personal or financial info, so it is simply a best guess from the lender based on a limited date.
A mortgage pre-approval, on the other hand, is a much more involved process. The mortgage lender will basically go through the standard loan underwriting procedures. They will gather key financial documentation and information from you. They will review it carefully to determine your home loan eligibility. This can give you a much more accurate assessment of your mortgage qualification standards based on your income, actual credit score, debt-to-income (DTI) ratio and other specific financial factors.
A mortgage pre-approval will also give you more buying power when it comes time to search for your home and start making offers. You will know how much you can afford, and you will have a pre-approval letter that you can include with your purchase offers. This shows the home seller that you are a serious buyer with solid financial backing.
In addition, the mortgage pre-approval will generally help make the closing process go much smoother. The lender has already done most of the heavy lifting, so there are fewer risks of getting denied or having major setbacks. The only time you might have problems is if your financial situation changes dramatically between your pre-approval and the final closing stage (for instance, if you lose your job or something like that).
Explore Your Mortgage Lending Options
During the mortgage pre-approval process, ask your mortgage lender or mortgage broker about which loan programs you may qualify for based on your financial situation and background. A VA loan, FHA loan or USDA loan may offer better mortgage rates compared to a conventional loan. Or, the conventional loan may be better depending on the size of your down payment. There is not one mortgage solution that is best for everyone. A good lender will help you explore your options and lock in the best mortgage rate.
Take 30 seconds and explore all your mortgage rate and closing cost options.
If you are buying a home, contact Moreira Team today to get started on your mortgage pre-approval. We’ll be happy to answer any questions you have and we are a mortgage broker certified to offer many different loan types through many different lending sources, so you can be sure you are getting the best mortgage rate possible.