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Brian Dawson

How to shop for an Interest rate

Monday, January 21, 2013 - Article by: Brian Dawson - Land Home Financial Services - Message

Interest Rate Shopping

Shopping for interest rates is much more complicated than most people are aware of. It is not as simple as just looking up who is advertising the best rate. There are many factors involved in determining what you specificly qualify for. Too many of prospective clients wish me to simply quote them a rate. The more you know about the clients qualifications, the better you can provide them with not only the lowest rate, but an accurate rate that they can better make an informed decission on. A quality lender will take the time to do the following for each client.

1. Determine the length of time the client is planning on staying in the home. This will directly impact how you structure the loans term, closing costs AND the interest rate.
2. Do a thourough examination of the borrowers qualifications. This includes their debt to income ratio, aproximate loan to value on their home, compensating factors such as available assests, region of the United States the home is located in and FINALLY their credit score.
3. Provide them a Good Faith Estimate in writing with 3 interest rate and closing cost scenarios.
4. Explain to them the difference between "floating" the interest rate and locking rate.
5. Advising them on how long to lock an interest and explaing to them how it affects the rate itself.


Closing Costs vs. Interest Rate

Too many clients are unaware that EVERY bank,credit union,mortgage broker, or direct lender is in the business of making money. There is NO SUCH THING AS A NO CLOSING COST LOAN! If something is advertised as a no closing cost loan than the interest rate is raised accordingly to pay for your closing costs. The bank actually prefers a no closing cost loan. If they can get a higher rate and simply pay your closing costs, they stand to make thousands of more dollars over the life of the loan. Most all cases it is 10's of thousands of dollars more. A no closing cost loan CAN be beneficial however. If the client plans on selling the property say within 5 years than its worth it to add no money to principle of the mortgage. Take the monthly payment savings you can get while you are in the home and then sell it and have more money at the closing table. If this is not your intention and you plan on staying in the home for 15 or more years than paying the closing costs and getting the lower interest rate is what you want. By doing this you will be laughing your way to bank. Determining your time to recoupe your closing costs is also very important in deciding how to structure your loan and select your rate. A true mortgage profressional is not afraid to be transparrent and show you all the options you have, answer any and all questions and advise you on your best course of action to take based on your qualifications and your goals with your property.

For more valuable information to consider when buying or refinancing your home visit my website at

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