September 6, 2012

Why Women Paying Higher Mortgage Rates

If you want to get the lowest mortgage rate on a home loan, you absolutely have to shop around. Unfortunately, it seems that many women aren’t doing that.
According to a recent study, women tend to pay higher mortgage rates than men do. That’s not because of discrimination, the researchers found, but because men are more likely to check with several different lenders in order to find the best rate.

Personal recommendations vs. shopping around
Women, on the other hand, are more likely to rely on the recommendation of a friend or relative, according to the study, which was published in the Oct. 11 issue of the Journal of Real Estate Finance and Economics. As a result, they were 32 percent likely to pay a higher rate, the researchers found.

While a personal recommendation is a good starting point, it isn’t enough to be sure of getting a good deal on a mortgage, as the study shows. Ideally, you want to obtain rate offers from at least three mortgage lenders or brokers before making a choice, and make sure you’re looking at apples-to-apples when comparing loan offers.

Finding the best deal on a mortgage
A good way to proceed is to get several lenders recommendations from people you know, or check around to find several lenders who are offering good rates. Be sure to look into various types of lenders as well – large national banks, online lenders, mortgage brokers and small-to-medium local lenders and credit unions. Check with your own banking institution as well, of course.

Narrow them down to what appear to be three or four good possibilities, then call each of them to request a loan estimate. Include how much you wish to borrow and how much you’re plan to put down, and ask them to send you a loan estimate listing the current interest rate they’d charge and all fees. Tell them you’ll be doing the same with several other lenders and will be choosing the best overall deal.

Timeliness is essential
Two more things to remember – be sure to call all of them the same day – preferably the same morning or afternoon, since mortgage rates can change every few hours. Also, ask them to indicate what your interest rate would be with zero, one or two discount points included. Discount points are a way of prepaying mortgage interest to obtain a better interest rate – advertised mortgage rates often include points, to make them look better – so you want to make sure you know exactly what they’re offering.

When you receive the estimates, compare the various rates and the fees each lender charges to determine which is the best deal. An easy shortcut is to compare the Annual Percentage Rate (APR) on each offer, which is a way of estimating the true cost of a loan – it’s essentially the effective interest rate you’re paying when all fees are accounted for. Lower is better.

Mortgage rates change all the time and so do the various loan packages offered by mortgage lenders – just because a friend of yours got a great deal with a certain bank two years ago doesn’t mean that same bank is offering the best deals today. Mortgage fees can vary greatly from lender to lender, and a small difference in the interest rate can add up to a lot of money over time – so it’s well worthwhile to obtain several mortgage loan offers before committing to a lender.

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