I am a first time home buyer. I wonder how I can get the best mortgage rate? I am not thinking about buying points or anything. Instead I want to reduce my cost on getting the loan. Is there any websites listing different mortgage rate from different mortgage companies?
You may want to try zillow.com or lendingtree. They are based on the same idea that lenders will submit bids to compete for your business. However, be aware that lenders don’t work for free and you are going to pay for a refinance whether you pay closing costs or whether the lender charges you a higher than market interest rate to get their compensation. There is really no such thing as a "no-cost" refinance.
The size of your loan will determine how much higher the interest rate has to be for the lender to pay your closing costs and still be compensated. For example, if you have a $200,000 loan amount and the closing costs on a standard refinance with a par interest rate for a loan that size are $4,000. Lets say the par rate is 5%. "par" just means that you don’t pay extra points and that the lender doesn’t make any compensation on the back. However, at 5.25% the lender might get paid 1 point when the loan sells on the secondary market. At 5.5% that lender might get 2 points in the secondary market. at 5.75% maybe 3 points. So to do a "no-cost" and still make 1 point compensation, the lender will offer you 5.75%, make 3 points and use 2 of those points to pay for your $4,000 in closing costs.
A "no cost" mortgage can make a lot of sense if you aren’t planning on staying in the home long term. If you are planning on staying long term (maybe 5 years or more), you might save more money in the long run by paying some closing costs and getting a lower rate. Just my two cents as someone in the industry.
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