How Do You Find The Cheapest Mortgage?

Are you in the market for a cheap mortgage? If so, you have come to the right place. Mortgage rates are currently on the rise. This article provides information on what you should consider when shopping for the cheapest mortgage.

With mortgage rates sharply rising, homebuyers should be cautious when shopping for competitive mortgage rates. You have to think and act more strategically to get a good deal on that all-important home loan. In fact, average 30-year fixed mortgages exceeded 5% recently as per Mortgage News Daily – a resource that tracks daily real-time changes in lenders’ rates. It’s an interest rate not seen since 2011 other than a couple of days in 2018. The current mortgage rate is 1.75% points higher than at the beginning of the year.

Chief financial analyst at Bankrate Greg McBride says that it has been the fastest and sharpest rise in mortgage rates in 28 years. In fact, it’s similar to a 17% increase in home prices since January this year. The higher rates were spurred by the Russia-Ukraine war, inflation, and the recent moves by the Federal Reserve. This increase can deter some would-be home shoppers, especially with an average 32.3% increase in home prices since last year.

But McBride and other real estate experts say that there is still plenty of appetite in the real estate market. Hence, if you want to invest in your dream home, you will need different tactics to get the best mortgage rate.

Here are some of the most important steps you need to take to find the lowest home loan on the market.


Clean Up Your Credit

The first step is to clean up your credit. Make sure there are no mistakes in your credit report and fix them if there are any. Your credit report will include information that goes into your credit score. In fact, the credit score is a key determinant of the mortgage rate you will be getting. Incorrect or negative information in your credit report can impact your ability to get the lowest rate.

Get a free copy of your credit report from You can get copies of your report from the nation’s three major credit reporting bureaus including Transunion, Experian, and Equifax from this website. You will be entitled to this free information once a year. Most lending agencies require you to have a credit score of 740 to qualify for the most competitive mortgage rates.

Choose A Fixed Or Adjustable-Rate Loan

If you plan to stay in your new home for at least 10 years, you should opt for a 30-year fixed-rate loan and pay relatively low monthly payments. On the other hand, if you want to pay off the debt sooner and can afford higher monthly payments, you should opt for a 15-year fixed-rate loan. It has a lower interest rate and will let you save thousands of dollars over the life of the loan.  

The short-term adjustable-rate mortgage is another option available for you. These loans come with lower rates for an introductory period and then a higher rate for the rest of the life of the loan. For example, a 7/1 adjustable rate means the rate will remain fixed for 7 years and will be adjusted according to the market rate after that period. But the rate can only increase a maximum of 5% points above the original rate during that period.

If you plan to stay in your home for some time, this might not be the best option for you, especially if the interest rate continues to trend higher over time. McBride says that you don’t want to be in a position where the adjustable-rate mortgage begins to rise and you are burdened with a large payment increase. He says that these loans are riskier than in the past because the rate is supposed to change every 6 months.

Until recently, the rate changed every year. But the lending industry is currently in the process of changing the financial index on which the rate is based in favor of an index that frequently changes. 

Shop For A Loan

Shop for a mortgage at a wide variety of lenders before you choose the best mortgage for your home. In fact, you should shop at banks, mortgage brokers, and online originators like Quicken Loans as well as aggregators like LendingTree. When you go to their websites, you will come across a form to fill out to immediately get interest rate estimates or a company representative will call you with the right quote for you. You can also check out Bankrate to compare different mortgage rates and find the best deal in town. 

When we checked out Bankrate, we were able to get lower rates from different banks. In fact, Bankrate’s average mortgage rate is calculated by using information from more than 100 banks and averaged 4.88%. But an online mortgage broker – Morty – was advertising a 30-year fixed loan with an APR or annual percentage rate of 4.285%. On the other hand, Wells Fargo was offering a 30-year fixed-rate mortgage with an APR of 4.625%. Freddie Mac – a quasi-government agency that bundles mortgages and sells them to investors – offered a 30-year fixed-rate mortgage at slightly below 5%. 

Another good method is to find a lender’s phone number and call them directly. You can get pretty accurate estimates over the phone. But you should give the lender your Social Security Number if you want a quote that could lead to a firm offer. You should first decide on what type of home you are interested in and what type of mortgage you want before shopping for mortgage loans. You should also inform the lender where you are in the process. Are you just starting to shop for your dream home, or do you have an accepted offer? 

Once you start to fill out the loan application, you should provide important information about your financial and personal life. Have all the essential paperwork in hand before you start filling out the application. The best thing is to refer to Zillow’s checklist of what is usually required. Al Moreira – the president of Moreira – a reputable mortgage information website based in Riverdale, N.J – states that you should ask the potential lender about a float down on your mortgage.

With such an option, your mortgage rate can drop before closing the deal in case interest rates fall even if you have already locked in the rate. This feature entails a fee of $500. But it can save you a lot of money if interest rates fall before you close the deal. 

Look At Smaller Lenders

You should also look at smaller lenders such as community banks and credit unions other than big banks and online lenders when shopping for the best mortgage for your home. You can search online for such unions with your home state and a term like “community bank mortgage” “credit union mortgage” or “S&L mortgage.” We have found some competitive mortgage options including:

. Maspeth Federal Savings in N.Y., shows an annual rate of 4.008% for a 30-year fixed loan. 

. Cleveland-based Third Federal Savings & Loan shows a 30-year fixed-rate loan with an APR of 4.47%.

In fact, smaller lenders have better mortgage rates for adjustable-rate mortgages. They offer better rates and terms to clients with variable income streams like self-employed clients. It is because they don’t often sell those loans in the secondary market similar to large banks. Since lenders are putting these loans on their books, they are in a position to price them any way they want.

Consider A Mortgage Broker

A broker can get you a better rate since they shop among many lenders. But you should remember that mortgage brokers get paid by banks and not you. Hence, you should be cautious when dealing with them. Get recommendations from friends and colleagues who have had a good experience with the potential broker before you choose the right one. If your income is variable, you will benefit from working with a mortgage broker. These professionals specialize in situations that fall outside the mainstream. 

The CFPB Loan Estimate?

Once you have some good rates from different lenders, ask them for a loan estimate. It’s a standard document that’s designed by the CFBP to let you compare mortgages. To get a loan estimate, you should provide documents of your income and assets. They will require your Social Security Number to research your credit score. Multiple inquiries on your credit records won’t lower your credit score as long as all of these requests come within a 45-day period and are for the same product – a home loan. They will all be considered one inquiry.

Try to get all the loan estimates on the same day so that you have an accurate comparison. There are three key figures to take into consideration when comparing mortgage loans – the interest rate & principal accrued after the first 5 years of the loan, the annual percentage rate, as well as the total interest percentage. You should also focus on the first page of the report, which shows an estimate of the amount of cash needed at closing. It gives you an idea of how much money you need to close the loan early.