How to find the best mortgage rates

Before you begin searching for the best mortgage rates, you’ll need to decide what type of loan meshes best with your financial goals.

While the most popular loans are 30-year fixed-rate loans, you may also want to consider the benefit of a shorter term mortgage loan, such as a 15-year or 20-year loan. And if you intend to sell your property within a few years, you might also consider a hybrid adjustable rate mortgage with a fixed initial period of five, seven or 10 years.

Mortgage loan numbers to know

In order to make a valid comparison of loan costs, you’ll need to know more than just the interest rate. You’ll need to know:

• Whether the rate is fixed or adjustable
• Whether you need to pay points to get the rate, and, if so, how much
• The annual percentage rate (APR), which takes into account points and fees
• The underwriting fees
• Your own financial qualifications and credit score.

Remember, the best mortgage rates are only available to highly qualified borrowers, so if you have less-than-perfect credit, you may not be approved for the lowest mortgage rates.

Home refinance or purchase

If you are refinancing, you’ll need to have an idea of how much equity you have in your home. If you have less than 20 percent equity, you may need to pay private mortgage insurance (PMI), which adds to your monthly payments. You’ll also need to pay PMI if you are buying and making a down payment of less than 20 percent. If you opt for an FHA loan, you’ll also have to pay mortgage insurance.

Searching for the best mortgage rates

Once you know the type of loan you want, you can begin searching for the best mortgage rates in four places:

• Your current financial institution. Check to see if your bank or credit union offers special rates for existing customers or, if you are refinancing, ask about streamlined refinancing, which could save you time and money.
• Mortgage lenders. Ask for recommendations from friends and colleagues or a realtor for a mortgage lender, then call around to ask for mortgage rate quotes. Lenders can typically only offer a handful of loan programs that are available at their own financial institution, but these may come with competitive mortgage rates.
• Mortgage brokers. A mortgage broker can do your shopping for you among the lenders the broker works with. Ask about compensation to make sure you aren’t paying a higher interest rate as payment to the broker.
• Online mortgage loan sites. Searching online can yield leads to low mortgage rates, but make sure you also do your homework to make sure the lender is legitimate and that you will be able to close your loan at the promised mortgage rate.

Once you have gathered mortgage quotes from a variety of sources, you can also go back to your bank, lender or broker and see if they can match or beat the best interest rate you’ve found. If you are a good candidate for a loan, lenders should be willing to compete to offer you their best mortgage rates.