How Do I Know If I'm Getting a Good Mortgage Rate?
When you're shopping for a mortgage loan, you'll probably be focused on one number more than any other: the interest rate that a mortgage lender or bank quotes you. This number can make a significant difference in the amount you pay each month for your mortgage. If you have a $200,000 30-year fixed-rate mortgage with an interest rate of 7 percent, you'll have a mortgage payment of $1,330.60 each month. If that same mortgage loan comes with an interest rate of 6 percent, you'll pay just $1,199.10 each month. There are several factors to consider in determining if you're getting a good mortgage rate.
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Instructions
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Order at least one, and preferably all three, of your credit scores. The nation's three credit bureaus--TransUnion, Experian and Equifax--all compile credit scores on you. These three-digit scores, which range from about 350 to 850, tell lenders how well you've managed your money in the past. If you've missed several car or credit card payments, your score will be lower, and mortgage lenders will charge you higher interest rates. If your score is 720 or above, you'll generally qualify for the best rates. Ordering a credit score is not free; Experian, for example, charges consumers $15 for their score as of 2010.
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Find the average interest rates on 30-year and 15-year fixed-rate mortgage loans. Several websites list these rates daily. One of the best is Bankrate.com, which lists average interest rates for a wide variety of mortgage loan products.
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Shop around with several mortgage lenders and banks. You may have to give these institutions permission to access your credit reports and provide them with a rough estimate of your gross monthly income and debt obligations. But once you do, they'll be able to give you a general idea of the interest rates they'd charge you for different mortgage loans. Compare the differing numbers--and they may differ significantly from bank to bank--they provide.
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Analyze all the information you've gathered to see if the rate a specific bank or lender is quoting you is a good one. You may think that a rate higher than the average you've found online is a bad one. But it might not be, depending on your individual circumstances. Consider your credit score: If it's under 720, you may be charged slightly higher rates than the national average. Take into account the rates quoted to you by other banks and lenders. If they, too, were all above the national average, it probably means that your credit isn't good enough to qualify for the lowest rates.
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