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Mortgage Process >> Getting the Best Deal
Getting the Best Mortgage Deals from Lenders
by Brandon Cornett, publisher of Home Buying Institute
Finding the best deal on a mortgage loan can save you thousands of dollars over the life of the loan. So who offers these kinds of deals today? How do you find the best rates when shopping for a mortgage loan? These are a few of the questions we will address in today's lesson.
The Best Deals Are Limited to a Few
The first concept you need to understand is that only a small percentage of borrowers will qualify for the best mortgage deals a lender has to offer. So when you see a low interest rate being advertised by a particular lender, it's guaranteed to be followed by an asterisk and a disclaimer. The disclaimer will say something to the effect of: "This offer is limited to well-qualified borrowers only." This means the lender reserves their best mortgage deals (i.e., their lowest interest rates) for certain borrowers who meet pre-determined underwriting criteria.
What are these criteria, and how do you meet them?
Every lender has its own underwriting guidelines, which they use to approve or reject mortgage applications. But while their internal processes may vary, all lenders consider the same basic factors. These factors include your credit score, your current income, the amount of debt you are carrying, and the affordability of the loan when compared to your income. If you perform well in all these areas -- particularly the credit score -- you may qualify for the best mortgage deals the lender has to offer.
Who Offers the Best Mortgage Rates?
In the previous section, we discussed the fact that lenders have a broad range of interest rates they can assign to loans. In order to get the best rate, you have to meet certain criteria established by a particular lender. So it's hard to say who offers the best deals at any given time, because there are so many variables at play. In other words, a well-qualified borrower can probably get a good deal from any lender. Granted, one mortgage company might be able to shave off a tenth of a point here or there, but it really comes down to the borrower's qualifications. That's the key to all of this.
Here's what it boils down to. Trying to figure out who offers the best deals on mortgage loan is only half of the picture. You also need to ask the question, "What can I do to make myself better qualified in the eyes of a lender?" If you can improve your credit score and pay down your debt, you'll have a much easier time getting a low rate.
Using the Internet To Shop for Deals
The Internet makes it a lot easier to shop for the best rates on home loans, because you can compare offers from multiple lenders with very little effort. For example, if you use the links provided on our mortgage quotes page, you can receive information from several different companies at once. Not only is this convenient, but it also helps you find the best deal on a mortgage based on your qualifying criteria.
Here's what you need to take away from this lesson:
- Getting a low interest rate on a home loan has more to do with you, as the borrower, than it does the lender.
- Every mortgage lender has a range of rates and terms they can assign to a particular borrower.
- So if you want to get the best mortgage deals available from a particular company, you need to make sure you are well qualified -- as defined by the lending industry.
- You will probably need a credit score higher than 760, and you will need to have a favorable debt-to-income ratio.
- These are just minimum requirements. Each lender may have additional underwriting guidelines and criteria in place.
Who offers the best mortgage rates is a common question asked by first-time homebuyers. But the better question is: What can I do to make myself better qualified in the eyes of a lender?
Where to Go From Here
I hope this article gives you a better understanding of the lending industry and how it operates. If you would like to learn more about home loans, interest rates and similar topics, use the menu provided at the top of our website. There are thousands of articles, lessons and Q&A sessions on this site, so you're bound to find the information you seek.
Here are some articles that go along with this particular topic:
How to Find the Best Deals on Fixed-Rate Loans
The Best Ways to Improve Your Credit Score
About the Author
Brandon Cornett is the publisher of the Home Buying Institute.
