As a past or a potential homebuyer, you’ve surely been tempted to choose your loan based on its interest rate. There’s no wonder in that — the biggest and brightest numbers in loan ads are the rate percentages. But is the interest rate really that interesting?
It’s a common misconception that many borrowers still hold on to, but it is just that: a misconception. So here comes the golden rule: A mortgage loan should not be chosen purely based on the interest rate. Aside from the fact that rates tend to change by the day, the differences are usually so microscopic that what you save on that marginally lower interest rate, you usually pays back in fees and other add-ons anyway. As a borrower, you need to realize that once a credit score has been assigned to you, the offers will be more or less identical, and what appears to be an advantage in a lower interest rate will usually come through the back door as another payment, sometimes even higher.
A good loan officer will be able to tailor a loan based on many aspects that will cover your individual needs, such as the borrowing capacity, insurance, or the various loan programs you can make use of. So be patient, and let them do their job. Eventually, you’ll understand that the interest rate is not the most important metric you should start your borrowing with. It may feel a little weird if the loan officer won’t immediately give you numbers and start haggling, but like I said above, a good loan officer should be tailoring the right loan for you, and to do that, he needs to find out enough about your situation to give you proper advice.. Try and focus on the value of the service as a whole before you get to the price. Understanding the fee and rate policy that comes with your tailored loan is more complex than just what rate you’re getting, so listen carefully and try to see the big picture, instead of the (seemingly) big numbers.
Value comes before the price. So don’t get startled if the discussion starts with broader questions about your lifestyle preferences and financial concepts. It’s only to help the loan officer get a better idea about your situation, and it will also help you understand the wide context of what signing up for a mortgage loan really means, what plays a role in getting approved or not, and how can you influence these factors.