How can you get the best rate for your next home loan in Seattle, WA?
We all want the best possible mortgage interest rates when getting a new home purchase or refinance loan. Whether it is just for bragging rights at dinner with your friends, keeping your monthly payments sustainable, or being a smart borrower who enjoys knowing they are saving a lot, lower interest rates are just more attractive. So, what do you need to know to secure the best rate on your next Seattle home loan?
Know What A Good Rate Is
How do you know if you are getting the best Seattle mortgage deal? What is a good rate considering your situation anyway?
There are two important parts to this:
- The difference between advertised interest rates and reality
- The difference between advertised rates and the real APR
A low rate ad can be very deceiving. If you read the accompanying required legal fine print, that rate is only being offered for very specific circumstances. For example; the perfect borrower, buying a 2,000 square foot single family home, in the best neighborhood, putting down a 50% down payment, and taking a loan of $350,000, with an 800 credit score, and more. Everyone else is going to get a much different rate.
There can also be a big difference from this advertised interest rate, and the APR. The Annual Percentage Rate (APR) is how much interest you are really paying when you factor in any lender fees. So, if one lender advertises a 2.5% rate with a 3.5% APR, and another offers a 3% rate, with a 3% APR, the second will actually cost you a lot less. It’s technically classified as a better deal.
Choose To Pay Points
Your APR and monthly payments are a balance of the points you pay up front, and your interest rate. You can get a no points loan. The rate will be higher. Or you can choose to pay upfront points, and buy down the interest rate. This makes the most sense when you plan to keep this loan for at least several years, you have extra cash, and you are mostly concerned about monthly payments and the rate, versus cash out of pocket. Your Seattle mortgage loan officer can help you calculate which is the best combination for your goals and situation.
Know Your Bumps & Discounts
To get the best rate home loan, you also want to know how lenders factor and choose what rate to give you. This is often a secret sauce that almost no borrowers know about. However, if you ask your mortgage broker to price out your loan in advance, they can give you an accurate quote. Most don’t, and they end up at the closing with a much higher mortgage rate and costs than they expected.
Lenders take a base rate (which can change by the hour), and then add and subtract discounts and bumps depending on a variety of factors. If you know them, you can position yourself to get a far lower rate with just a few tweaks. Like borrowing $100 more or less.
These factors include:
- Loan length: 10, 15, 25, or 30 years
- Rate type: ARM mortgage or fixed
- Type of property: Single family, multifamily, condo or non-warrantable condo
- Loan amount: Conventional or jumbo mortgage
- LTV: How much you are borrowing versus the value of the home
- Loan purpose: Refinance, cash out refinance or home purchase
- Loan position: First, second or third mortgage
- Credit rating: Score and history
- Property use: Primary residence, second home or vacation property
Use A Mortgage Broker
You can stomp around to every lender in Seattle and websites on the internet trying to figure out their real rates, costs and how they factor rates. Or you can use a mortgage broker who does it all for you in minutes, and can even get you better wholesale interest rates with the same banks.
Pick A Reputable Lender
No ads or quotes are worth anything unless they actually deliver on their promises. Sadly, there are many unscrupulous and inexperienced lenders and loan brokers out there. They may grossly mistquote you, or purposely bait and switch you. Either way, you can end up at closing paying far, far more than anticipated. Or you may never make it to completing your loan at all. Pick the best lenders with the help of an experienced local Seattle mortgage broker.
When you find a good rate deal that works for you, move fast. There is no guarantee it will still exist tomorrow, next week, or even later today. Lock in your rate while it’s good.
Provide As Much Documentation As Possible
The more documentation you can provide to prove your income, assets, and credit history, often the better interest rate you will get. There are alternative options for the self-employed and those needing non-traditional methods of qualifying. Though if you can, more documentation can help.
Borrow When You Don’t Need It
Mortgage lenders and banks love to give you money when you don’t really need it. That’s when they are most motivated to give you the best deals. If you wait until you are desperate, you lost your job, ran out of savings and your credit is taking a beating, you aren’t going to get the same rate. Borrow ahead of your needs.