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Is A Low Mortgage Interest Rate Always The Best Rate?

By Stacy Williams

Get the perfect low rate mortgage today when you know the secret information that the mortgage lenders don’t want you to see.

Consumers looking to find the best possible mortgage rate before buying a new home will need to do plenty of research prior to deciding which mortgage loan program is the best for their specific buying situation. Major changes in the lending industry over the past year have forced lenders to modify, eliminate and add loan programs that adhere to the new, stricter lending standards.

What Should I Look at in Addition to the Interest Rate?

There are many different types of mortgage programs out there, and when a consumer asks the question, “is a low mortgage interest rate always the best rate?” the answer is that it depends on the borrower and the other specifics of each loan.

What are Loan Features?

If there were only one variable involved in the comparison of mortgage loan programs, then yes. The best loan would be the one with the lowest interest rate. Fortunately, there is more than one type of mortgage loan program. In addition to comparing interest rates, it is also now necessary to compare the closing costs, loan fees and point. That isn’t all, though. Consumers must also compare the loan features which include PMI, the loan to value ratio and also the buyers required debt-to-income ratio.

What Other Costs are Involved in Purchasing a Home?

Although the mortgage interest rate does determine the monthly payment, a lower rate is not always the best indicator of a good mortgage loan program. An example of this would be a loan program with an adjustable 5% interest rate that requires a 40% downpayment and $10,000 in closing costs on a $100,000 home. A 5% interest rate sounds great, but it is adjustable and will undoubtedly increase substantially after the initial loan period ends. A 60-40 loan to value ratio is not as good as the standard 80-20 ratio. And closing costs on a $100,000 home should be nowhere near $10,000!

Is the Best Loan the One with the Lowest Interest Rate?

Take these things into consideration and you will quickly realize that a low mortgage interest rate is not always the best rate.

Related posts:

1. How Do I Compare Mortgage Rates
2. Is It Worth It To Pay Points For A Lower Interest Rate?
3. What First Time Buyer Programs Are Available For A Mortgage?
4. Do APR Payments Go Up When Interest Rates Go Down?
5. Are There Special Mortgage Rates For 1st Time Home Buyers?