Best Mortgage Loan Rate

Anyone who is buying a house or refinancing an outstanding mortgage knows well the difficulty of locking in a good rate. Available mortgage rates fluctuate wildly from bank to bank, as well as from month to month if the federal government decides to change the interest rate. Many refinancing deals that seemed sensible or indeed too good to pass up were revealed to be based on faulty assumptions and fraudulent behavior during the financial crisis of 2008, further complicating the process. So how is it possible for someone to get the lowest rate on their mortgage loan?

The best and simplest and most important way is to have a good credit rating. A credit rating is a means by which banks determine the amount of risk they would take by giving that person a loan. People with credit ratings over 800 are considered to be almost risk free, and those in the 700 range tend to be very low risk. Persons in the 500 and 600 range can often still get mortgage loans, but often only with high interest rates. People with ratings below 500 have difficulty getting loans under any circumstances. The method by which these credit ratings are calculated is proprietary and varies among major credit rating agencies, but it involves examination of outstanding debt and how effective a person is at paying it off consistently and reliably. Credit card debt and utility bills are the predominant means of determining one’s credit rating, as are any outstanding mortgages, and if any payments on them have been missed. Persons should review their credit ratings at least once a year to look for any mistakes, since credit ratings are very complex and mistakes often occur, driving the rating down. It is not possible to remove actual missed payments in order to influence a rating, however.

Persons with a good credit rating can get the best mortgage loan rate by shopping around. One of the best ways to do that is by using an online service known as Lending Tree. Before Lending Tree, it was necessary for a person seeking a loan to approach many banks with their credit rating in tow as they shopped around to get the best mortgage loan rate. This was time consuming and also often confined borrowers to the best mortgage loan rate offered by banks in their area. Lending Tree allows for potential homeowners or persons looking to refinance to expose themselves to thousands of banks from all across the country, and then examine the offers that the banks extend. This is ideal for getting maximum exposure, since after three days or so every bank that is interested in extending a mortgage will have found the borrower via online search algorithms. While some people may be averse to giving their loan to a company which may be hundreds or even thousands of miles away, almost all loans are repackaged and sold to other persons at some point. As such, even local loans often ultimately end up in the hands of major investment firms on Wall Street or in Los Angeles. Since loans will be sold on to other hands anyway, there is no point in limiting oneself to local banks when searching for the best mortgage loan rate.

Those who wish to deal with a local bank, however, would do well to choose a smaller community bank or credit union. These banks often use lower mortgage loan rates in order to lure customers away from larger banks. Additionally, many such small banks were founded or have been developed for purposes of charity and community development. As such, they are able to offer superior rates of interest, since they are compelled to do so in their charter. Even credit unions not founded or principled in such a manner tend to offer the best mortgage loan interest rates because they are owned by the depositors and borrowers instead of stockholders. As such, persons taking out loans can vote to turn down specific kinds of expensive loan packages or risky investments, ensuring that the rates offered to customers. Larger banks are best avoided by first-time homebuyers and persons with low credit ratings, since their loan packages and ideal customers tend to be wealthy persons or large corporations, whose financial needs are different.