How to Find the Best Mortgage Rates
Buying a home is probably the biggest and most important investment you’ll make in your life. Sadly, not everyone has sufficient money to cash it all on a house. A big majority of people have to rely on Mortgages from different sources to fund their home-owning dreams. The good news is that there are so many different lenders offering mortgage plans out there. Unlike a decade ago where we mostly relied on traditional banks for mortgages, we can now access mortgages through various online platforms and other lenders. The bad news is that the mortgage industry remains almost as complicated as it was over a decade ago. With so many options to choose from, it has also become really stressful to know which option is the best fit for your unique situation. Even worse, some people are not aware of what certain factors, which may appear inferior at the moment, can affect their mortgage plans in the long-term. We also cannot ignore the fact that mortgage rates are continually changing. If you check out mortgage rates today, don’t expect the figures to remain the same a month or even a week from now.
In this review, we have compiled the best Mortgage rate lenders as of March 2019. But before we go through all that, here is some information to boost your knowledge on mortgages and what you need to be looking out for:
Kinds of Mortgage
When you are shopping for a mortgage, you will have to choose between a fixed rate and an adjustable rate mortgage. This is one of the most critical decisions to make as it will determine the repayment plan of your mortgage throughout its term. Make the wrong decision here, and you’ll be trapped with an inconvenient mortgage that you’ll have to deal with until it is fully repaid.
- Fixed-rate Mortgages
As the name suggests, fixed-rate mortgages are repaid at a specific rate throughout the life of the loan. For instance, if you have taken out a 15-year fixed-rate mortgage, the lender will require you to pay a set rate, e.g. $1800 per month until the entire loan is repaid. This means that your mortgage rates are protected from fluctuations in the market.
Most fixed-rate lenders will also give their customers the opportunity to pay back the mortgage early. You should keenly read through the agreement and see the terms regulating the repayment plan.
- Adjustable Rate Mortgages
The interest rates in adjustable rate mortgages vary from one month to the next depending on the market conditions. While you might be able to save some cash in certain months when the rates are down, you could also end up spending a lot more when the rates hike. It’s due to this kind of uncertainty that some people usually prefer a fixed-rate mortgage where there are no surprises.
There is a unique type of adjustable-rate mortgage known as the Fixed-period ARM. Under this mortgage, the borrower will make fixed payments for a given period before the rates become adjustable. A fixed-period ARM usually has a 30-year term. With such a mortgage, the borrower will pay fixed rates for a period of 5, 7 or 10 years (depending on the lender) after which the rates will start to vary from one month to another until the mortgage is fully repaid.
So, which of the two is best for you? Neither of the two options is perfect for everyone. It all comes down to personal reasons. For instance, if you are the kind of person that doesn’t want to stay worried about the markets and what they will do to your mortgage rate, then you are much better off going with a fixed-rate mortgage.
On the other hand, if you believe that you won’t stay in the home for an extended period, you can take lower rate ARM and pay for the mortgage for the period that you will be staying in the house. Also, if you have markets and mortgage experience, you can leverage your knowledge and take out ARM if you believe that the rates are likely to go down in your favor in the coming years.
For how long should an ideal mortgage last? Currently, borrowers can choose between 10, 15 and 30-year mortgages. The mortgages come with unique terms making each one them ideal for a particular group of people. The 10- and 15-year mortgages have a lot of similarities in terms of features. For instance, both of them come with the following benefits:
- Lower interest rates
These mortgages attract much lower interest rates. Since the mortgages are supposed to be paid off within a short period, the lenders usually drop the interest rates as the likelihood of life-changing events happening (which may affect one’s ability to repay the mortgage) is much lower.
- Faster pay-off
Since the 10- and 15-year mortgages charge less in interest rates, the borrower gets to pay off the loan within a much shorter period. Also, a big percentage of the monthly payments made here will be going to the principal and not the interest rates.
You might also want to reconsider getting the short 10- and 15-year mortgages since they both require higher monthly payments. The math is really simple here; say you take a $200,000 mortgage that is supposed to be repaid in 10 or 15 years. When this amount is distributed, and the interest rates are applied, you will end up paying higher monthly payments in 10 years than you would in 15 years. If you compare this to the 30-year mortgages where the payments are spread over a longer period, you will realize that the shorter the period, the bigger the monthly burden.
This brings our discussion to the final option, 30-year mortgages, that come with many benefits key of which is lower payments. Since 30-year mortgages have a much longer term, the borrower is usually subjected to lower monthly payments. As a result, one can afford a costlier home under this plan than the other two options.
One major drawback with 30-year mortgages is the long time it takes to pay them off. If you are not careful, you may end up with mortgage obligations long after you’ve retired. Also, a big majority of your monthly payments in the initial years will be going towards the interest rates and not the principal amount.
So, which of the three should you go with? From a financial point of view, the 10- and 15-year mortgages are a better option compared to 30-year mortgages. Therefore, you should go with either of the two if you can afford the high monthly payments. If you can’t then you won’t have much of choice but to take the 30-year mortgage. 30-year mortgages are also a good option if you believe that you’ll be able to earn more in the coming years. You can hence buy a costlier home with a 30-year mortgage and repay it quickly and more easily once you start earning more.
Top 3 Mortgage Rates
SoFi offers excellent mortgage rates especially to people with a short credit history. Unlike most of the other lenders who are very strict on credit history, outstanding debt and other financial records, SoFi is more focused on “Social” details. The company believes that using these details provide better and more reliable predictions on one’s future financial behaviors.
The lower down payment and low fees of SoFi loans are also very enticing. This makes them an even better option for first-time non-traditional home buyers with limited finances like say, recent graduates.
- They consider borrowers with limited or no credit history
- The alternative methods of assessing one’s creditworthiness increase the number of people that qualify for the mortgages
- Individuals with high personal loans, e.g. student loans can still be eligible for these mortgages
- They come with additional products, e.g. student loan refinancing
- It’s an exclusively online mortgage lender
- The education and career requirements may be limited to some people
- Rocket Mortgage by Quicken Loans
Rocket Mortgage from Quicken Loans is yet another online lender with amazing terms and excellent services in general.
As the name suggests, the lender is very efficient in processing loans. You can easily log into the website to create an account and receive a quotation in no time. In case you are satisfied with the quote, you can start your application online and upload all relevant documents via the website. You can also track the progress of your application online.
Quicken was also top of the JD Power rankings in terms of customer satisfaction.
- Convenient since everything is done online
- They are fast
- There are different options for buying purchasing discount points
- They don’t offer HELOCs and home equity loans
- Not the best choice if you have bad credit scores or high debts
- The online exclusivity of this lender may be inconveniencing for everyone who wants to be in direct contact with a loan officer
- J.G Wentworth
If you are a veteran looking to buy a home or refinance one, then J.G Wentworth might just be the perfect lender for you. The company specializes in VA loans, and through its top-tier customer services, borrowers are guaranteed an excellent experience throughout the mortgage term.
The application process here is very effortless. The lender provides numerous online tools to make your application easier. You can also reach loan officers through the phone for additional guidance.
You can conveniently track your applications through the J.G Wentworth app or website.
- Excellent customer services
- Their services are available both online and through the phone
- Access to brick-and-mortar services is a bit limited
- The lender does not operate in NY, NV, MO. ID and HI
David is a financial expert who graduated from the University of Fordham (Master in Finance) in 2001. He has 10+ years of experience in private equity and wealth management. With strong expertise in senior-level financial planning, personal financial analysis, and mortgages, David knows his way around personal finance. Before working at CCR he used to be a financial analyst at McKinsey.
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