This mortgage rate mistake could cost you thousands
Most Americans have taken a hit to the wallet as a result of the coronavirus pandemic’s impact on the economy. Global poverty could increase by as much as 1.5 percent, and global trade continues to decline. North America is expected to suffer significant losses due to lower trade, according to the United Nations Industrial Development Organization.
The U.S. housing market is also feeling the effects of COVID-19. Interest rates are at a record low, meaning that despite a struggling economy, now might be the best time to score a record-low mortgage rate. Taking advantage of a low rate could potentially save you thousands of dollars. If you want to get the best deal possible, you should take the time to review multiple lenders. Shopping around is a vital step that many homebuyers skip. Using an online tool like Credible to compare rates is an easy (and free) way to potentially save a lot of money.
Shopping around could save you thousands of dollars
One percent seems like such a small number, but it can add up over time. Let’s look at a quick example.
- Lender A offers you a $400,000 fixed-rate home loan for 30 years at a 4 percent interest rate. At that interest rate, your monthly mortgage payment would be $1,909.66. Your total home loan would cost $687,478 over 30 years, and you'll have paid $287,478.03 in interest.
- Lender B offers you a $400,000 fixed-rate home loan for 30 years at a 3 percent interest rate. At that interest rate, your monthly mortgage payment would be $1,686.42. Your total home loan would cost $607,109.81 over 30 years, and you will have paid $207,109.81 in interest.
A simple one percent difference on your interest rate could save you more than $80,000 over the life of your home loan. That’s a lot of vacations or a lot of money you could invest in retirement. Don’t just accept the first-rate offered by a single lender.
If you're ready to purchase a new home, taking advantage of lower interest rates (even if it’s just one percent) could save you thousands of dollars. With Credible's easy online tool, you can compare rates from multiple lenders almost instantly — without any impact on your credit. Check out today's rates below.
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The interest rate shouldn’t be your only concern
While your mortgage interest rate will likely have the most significant effect on your loan, it’s not the only number you should consider. When you’re researching different lenders, don’t forget to ask them about fees and other associated costs. See what kind of rates you qualify for today through Credible.
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Typical fees associated with a mortgage loan include (but are not necessarily limited to):
- Origination fees and/or lender charges
- Any fees for purchasing points to score a low rate
- Closing costs
- Government fees
- Deposits (like an escrow)
- Early payment penalties
- Appraisal fees
- Home inspection fees
- Attorney’s fees
You can pay some of these up-front, while some lenders allow you to wrap these expenses into your loan. Adding the fees to your mortgage could increase your loan balance, monthly mortgage payment, and total paid over the life of the loan.
Don’t forget to check out the listed annual percentage rate (APR) with lender offers. Percentage rates represent the total cost of your loan, minus some fees. The APR can offer a broader look at how much your mortgage will cost.
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Buying a home is an expensive investment, but that doesn’t mean you have to pay top dollar for your purchase. Spending a little extra time reviewing lender options could save you tens of thousands of dollars.
You can maximize your savings by using an online tool, like Credible, to compare multiple lenders and loan options in one place. Make sure to have a notebook handy and take note of the interest rate and fees each lender presents.
To qualify for the best rates, here are a few things you should do:
- Get your credit score in shape: You’ll have better luck qualifying for lower interest rates with a credit score of at least 680.
- Have a low down payment: While you can get loans with no down payment, offering at least 10 percent could help you get a low rate.
- Consider multiple lender options: You can apply for mortgage loans through credit unions, banks, mortgage brokers, or private lenders. Review each option to see where you can get the best loan terms.
- Ask questions: Don’t be afraid to ask questions. Taking out a mortgage loan influences your future. Thorough research can make a big difference later.