The current mortgage rate may be greater than it was during the height of the COVID-19 pandemic, but historically speaking, it’s not excessive. In fact, at one point, interest rates on 30-year loans were well into the double digits, which is a far cry from the current rate of approximately 6%.
However, mortgage rates are not written in stone; they can fluctuate significantly based on your lender, loan size, credit, application timing, and many other factors. Using this simple tool, you may determine the current rates for which you qualify.
What are some typical mortgage errors?
If you’re intending to apply for a mortgage in the near future and want the best rates available, avoid these three costly errors.
Choosing the first lender you discover is unwise.
Not being pre-approved
Neglecting to protect your credit
Choosing the first lender you discover is unwise.
Mortgage loans differ from lender to lender. Each lender offers unique loan programs, interest rates, and periods. In many instances, they have distinct eligibility conditions. Therefore, it is essential to examine loan offers from multiple organizations.
You can begin the process immediately. A mortgage lender such as Rocket Mortgage can assist you in comparing rates and deals.
According to Freddie Mac, obtaining quotes from three lenders can save you $1,500 over the life of your loan, while obtaining quotations from five lenders can save you an average of $3,000 over the life of your loan. Occasionally, the savings can be considerably greater, especially on higher loan amounts.
When comparing loan possibilities, you may wish to take into account:
The bank or credit union with which you conduct the majority of your financial transactions. Existing customers may receive loyalty discounts from time to time. This may result in a discounted pricing or waived fees (or both).
A lender or mortgage company operating online. These businesses often have fewer overhead expenses than others and may be able to provide lower pricing.
A mortgage broker: These mortgage professionals have access to loan products from dozens of companies. They can assist you in finding the greatest loan (and interest rate) for your circumstances.
When comparing estimates, be important to examine the costs charged by each lender. On page 3 of your loan estimate is a section that outlines the overall loan costs over the course of five years. This might help you choose which loan is the most cost-effective in the long run. Don’t forget to compare rates as well!
Not being pre-approved
Pre-approval for a mortgage loan provides numerous advantages.
It provides an accurate estimate of the amount you can likely borrow. Then, you may use this number to steer your property search and stay inside your budget.
It helps you compete more effectively with other homebuyers. You can include your pre-approval letter in any offer you submit, and it will inspire confidence in the seller by demonstrating that you have the financial resources to support your bid.
It can sometimes expedite the closing of your loan.
Pre-approval can sometimes expedite the process because the lender already has a substantial amount of your financial data on file.
Neglecting to protect your credit
Your credit is crucial to the mortgage application process. In addition to affecting your ability to qualify for a loan, it also affects your mortgage rate.
Before applying for a mortgage, you should ensure that your credit score is satisfactory. Through websites such as Experian, you can simply estimate your credit score and receive frequent credit reports. Discover your credit score range within minutes!
The best mortgage interest rates are normally reserved for individuals with credit scores of 740 (occasionally 760) or above. Before submitting a loan application, if your credit score is not yet at the required level, you may want to work to improve it.
After submitting an application and receiving pre-approval, it is crucial to monitor your credit. Your lender will review your credit report one more before your closing date, and if your score has decreased, your card balances have skyrocketed, or you are behind on your payments, it might delay your loan or perhaps disqualify you entirely.
To prevent this from happening, don’t make any large purchases in the weeks coming up to your closing, including furniture or décor for your new home. Your credit should remain as stable and unchanged as possible whenever you apply for a mortgage, so hold off on purchasing these products until after your loan has closed.
Other errors to avoid
Obviously, this is not an exhaustive list. There are further blunders that might derail your mortgage, such as forgetting to budget for closing fees, failing to lock in your interest rate, or moving jobs or cutting your income immediately before closing on your loan.
Before applying for a loan, educate yourself on the mortgage procedure to prevent falling victim to them. Once you have submitted your application, work closely with your mortgage broker or loan officer and follow their advise. Additionally, you can call a free housing counselor for assistance with the procedure.