Updated: Oct 13, 2021
A mortgage payment is usually the highest expense for a family. When choosing a mortgage, make sure to shop for the mortgage interest rate. Although the two mortgage interest rates are slightly different, the accumulated mortgage expenses could be very significant over the years.
Before you make a big purchase, for example buying a TV, a computer or a piece of furniture, do you do research and compare prices? Well, it is the same when shopping for mortgage rates. After all, the money saved from the mortgage can buy many computers, TVs, and furniture pieces.
Why does the mortgage interest rate always change?
Most of the mortgages will eventually pool together and turn into bonds, called Mortgage-Backed Securities (UMBS). The mortgage securities price constantly changes according to the bond market movement, therefore, the interest rate of our mortgage also routinely varies.
Every morning, each mortgage company will issue its own new mortgage interest rate sheet. Loan officers then give you interest rate quotes according to their mortgage interest rate sheets.
When mortgage security prices change significantly, mortgage companies will quickly issue a new interest rate sheet during the day.
In this case, the rate quote you received from the loan officer before will no longer be valid.
That's why you may hear about a "rate lock". If you lock the interest rate with the loan officer, your rate will not change no matter how much the market interest rate rises or falls later on.
How to lock the interest rates at the lowest point?
Locking the mortgage interest rate is like buying/selling a stock. It is hard to predict where the lowest point is.
Will the mortgage interest rates be lower tomorrow? Even mortgage traders don't know the answer.
However, we know if the rates are low in general. For example, mortgage interest rates are at an all-time low now. 30 Year Fixed-rate mortgages are around 3%. This is a low point in general. It's a good time to lock the interest rate now.
Sometimes mortgage companies offer promotions, but they don't advertise online. As a result, most people are unaware of these promotions. That’s where you’re in luck! Our website MRateQuote.com works with loan brokers from multiple big banks and small brokers. You only need to fill out basic information then you will get quotes from 3 loan brokers. If you find a loan broker that offers a much lower rate quote than others, that lender is probably promoting that mortgage product. You better lock on that rate immediately!
Different loan officers; different quotes
Before a Loan officer joins our MRateQuote.com network, I always ask them: What type of loans do you specialize in?
Some loan officers say, "our bank's jumbo loan rate is very good, but the conventional loan interest rate is not competitive."
Other loan officers say, "our company does not do a Jumbo loan, but the conventional loan interest rate is very good."
Still, others say, "our company has good loan programs, and we can do down payments below 20% without mortgage insurance (PMI)."
Most people don't know the difference between loan officers. Consequently, if you happen to ask a loan officer who does not specialize in the mortgage you are looking for, you may get a higher rate.
For example, I wanted to refinance my investment property a while ago. My friend recommended me to her loan officer, who is from a prestigious bank. My friend bought a mansion and borrowed over one million dollars. This loan officer specializes in jumbo loans (mortgages with a high loan amount, usually over 822k), so she gave my friend a very good rate.
However, my small investment property only needs a $ 200,000 loan amount. Unfortunately, this loan officer doesn't have a competitive rate for a small loan investment property, and for this reason, she gave me a very high rate compared to rates from other small brokers.
If I didn't know about mortgage rate shopping, I would have taken the loan my friend’s loan officer gave me, and that would have cost me more than twenty thousand dollars extra over the years.
Generally speaking, you can follow these rules to find a loan officer that fits your needs:
Jumbo loans (loan amount> 822k): select a large bank or mortgage lenders. For example, PNC, Wells Fargo, Bank of America, etc. They have their own mortgage programs for jumbo loans.
Conventional loans (loan amount<822K): select a mortgage broker. They work with a lot of lenders and can find the lowest interest rate for you.
However, this is not always the case.
Sometimes I see a mortgage broker on our website that gives very good jumbo rates. This broker probably works with a large bank or lender who has a large portfolio of jumbo loans.
Remember, it is always wise to shop for mortgage interest rates.
Don't forget the cost of a mortgage
When shopping for mortgage interest rates, don't forget to compare the cost as well. It is common for some lenders to charge you a thousand dollars more in fees than other lenders.
The closing cost of a mortgage includes many items. Usually, you just need to compare the origination fee. The origination fee is a fee charged by the mortgage company.
Mortgage companies give different names for origination fees, eg., underwriting fee, lender fee, etc. You can ask loan officers, "what is your Total origination fee?"
When you apply for a mortgage, the loan officer will send you a loan estimate form in three days. Origination is on section A of this form.
Many times, people who come to our website to shop for interest rates ask me the same question:
Why did my colleagues/friends get a rate of x.xx%, but I get a much higher rate of x.xx%?
Mortgage interest rates vary based on borrower's credit scores, loan amount and home value ratios (LTV), house types, etc.
Do you want to know…
How do mortgage companies set mortgage interest rates based on borrowers' different situations?
How to make small adjustments and quickly get a lower mortgage interest rate?
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