How to get the BEST interest rate on your home mortgage and how/where to shop for loans.
We’ll talk about two things here:
a.) How to improve your credit score in 30 days, with “rapid rescore,” and, thereby, save $100 – $300/month on your mortgage payments.
b.) How to shop for loans … mortgage bankers or mortgage brokers … and which ones have the BEST rates?
There are two factors that go into determining your interest rate. Number one is your credit score. Number two, is the lender that you’re dealing with.
#1 Factor Affecting Interest Rate: Your credit score. Your credit score is critical in understanding the different rates (especially nowadays) and the different tiers and types of loans offered.
If you have a credit score in the 720 plus range, which is 720 to 800 (or even above, which is rare) you have what’s considered to be perfect credit. And you’re going to get the best interest rate available.
If you have a credit score anywhere from 680 to 720, you’re in the next tier, which is still very good. And you’ll get a decent to good interest rate. Below 680 down into the 620 range, you’ll get a less than perfect interest rate … maybe an average interest rate. And then, with credit scores from the 620-580 mark, you will get financing, but not at as good of an interest rate. Below 580 gets very difficult, but certainly not impossible to obtain financing.
So, if your credit is less-than-perfect, it’s not a reason to postpone buying a house because we can show you how to fix it. But, first of all, you need to improve your credit score immediately upfront.
There is a service that caters to mortgage companies, and they do a ‘rapid rescore’ of your credit scores – which means your credit scores increase.
With higher scores, you will qualify for a better interest rate. They can also remove mistakes, clean up any false entries or even dress-up accurate entries to look better!
The ‘rapid rescore’ services also have different techniques to get rid of negative and inaccurate issues, so your credit score will improve very fast.
And just to give you some idea of how this will apply to you … if you have an interest rate of 6.5% on a $250,000 mortgage, you might be able to secure a rate at 5.5%, simply by improving your credit score from very good to excellent – or by going from good to very good.
Even though the interest rate change is only 1%, the impact on your mortgage payment is quite significant. You would save $161.00 a month, which is $1,932.00 of savings in the first year alone.
And if you stay in this house for ten years, that’s almost $20,000.00! An enormous amount of money you’d lose, if you didn’t know about this one strategy alone!
However, don’t even worry if you have less than average credit scores and are not able to get the rapid rescore to bring your credit score up enough … to change your interest rate on the mortgage.
Don’t let that be a reason not to buy the property. Go ahead and buy the home.
It’s all right to take the less than desirable interest rate because, after 12 months of making timely payments, you will have what’s known in the industry as a ‘well seasoned mortgage.’
And once you have a seasoned mortgage, with at least a 12 month payment history, it’s much easier to refinance and get a better interest rate than when you had originally purchased and didn’t have a mortgage payment history at all.
You have now proven that you can make a mortgage payment. As a matter of fact, you’ve proven that you can make an even higher mortgage payment! So, obviously, you’d be able to make a new, lower payment at a lower interest rate. Of course, this is assuming you’ve made your mortgage payments on time.
So quite often, you’re not going to be trapped with that higher interest rate for the next ten years – maybe a year or two at the outside. But almost always, we’re able to help people get refinanced within 12 to 24 months, substantially drop their payment and get them the best interest rate available.
Yes, I’ll keep working with you down the road!
#2 Factor Affecting Interest Rate: How to shop for loans. Who do you use? There are mortgage bankers and mortgage brokers. Mortgage bankers feel they have the best program and products to offer you. And mortgage brokers feel the same way. So who’s right?
Well, as an insider, I prefer to deal with mortgage bankers, and here’s why. Mortgage bankers have their own money. They also have access to other sources of money. They have huge lines of commercial credit available, so they can instantly write checks for mortgage loans to people who want to buy homes.
Mortgage brokers don’t have any money whatsoever. They’re a broker. They basically take your loan application and go shop it to other mortgage lenders, mortgage bankers or other sources of money — but they don’t have any of their own money to lend. So they’re what would be referred to as a middle man.
Mortgage bankers have access to their own money. They can make their own decisions on whom and when they want to lend money. They have their own underwriting and make their decisions in-house. And they will often get a better interest rate than some mortgage brokers.
A mortgage broker will tell you they’re better than a mortgage banker because they offer many different types of programs from many different types of lenders … especially if you are challenged with some credit issues.
Well, what they don’t tell you is mortgage bankers can do that too. Mortgage bankers aren’t relegated to using their own money from their own bank. They can do the exact same thing as mortgage brokers and quite often do.
So my experience has shown that once a relationship is developed with a mortgage banker, one of the larger regional mortgage bankers in particular, you will generally find that you’ll get a better interest rate.
Mortgage brokers do have their place in the industry. And that is generally found when a borrower, who needs financing, does not necessarily fit within the ‘standard’ guidelines — and needs a lender who specializes in “out of the ordinary’ loans.
Another reason that a mortgage broker may work out better is when a borrower has a unique employment or credit situation, which would be best served by a mortgage broker who has a lot of alternate sources for mortgage financing.
This is not a hard and fast rule. It’s just something that seems to be happening more often than not. But, you should still shop for loans.
However, here’s a critical factor to understand when shopping for financing … don’t ever compare interest rates, by calling one mortgage company one day and ask for their interest rate and then call another mortgage company the next day and ask for their interest rate.
Because interest rates change and the market changes twice a day, sometimes three times a day. So it’s not going to be a fair comparison for you.
What you need to do is sit down and call whatever mortgage lenders you’re going to call within the same timeframe – maybe within the same hour in the morning or in the afternoon.
Doing it this way, you’ll find out exactly whether or not the two different lenders are offering you comparable loans and interest rates at that particular moment.
To conclude …
As you can see, with just this one strategy alone, you’ve learned there’s a way to improve your credit scores and get the BEST interest rates for your home purchase.
And you’ve learned the BEST place to shop for your loan – just like the wealthy, savvy real estate investors have been doing for many years!
Be sure to check your email often, because in a few days, you’ll get your fifth ‘inside real estate’ secret.
In it, I’ll be talking about how to save hundreds of dollars every year on Homeowners Insurance and How to save hundreds more, ever year on your annual real estate tax bill.
I’ll also teach you how to get the U.S. government to subsidize your monthly mortgage payment to the tune of hundreds of dollars every month!
Find the Best Deals and Save $25,000-$50,000 on Your Northern Virginia Home Purchase. Get My FREE Homebuyer Savings CD to find out How to use the “Insider Techniques” to get Huge Home Purchase Savings.
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Until next time,
Thierry Roche SFR, CDPE
Host of Talk Radio’s,
‘Inside Real Estate’