Getting the Best Mortgage
There is always a used Ford truck listed for sale with 6,000 miles. You can get a deal: one tiny scratch and heated seats for $4,246. The name for that car at a dealership is called “bait.” Bait is what fish eat before they bit the line and end up on a hibachi. The same is true for home mortgage prices quoted on the internet. Those prices are almost always meaningfully less than what Joe the Plumber can rent money for. So, how does Joe lessen the pain of the bite the banks are about to take out of his butt? Hold out for earthworms?
Joe can use an online comparison shopping engine: bankrate.com, quickenloan.com, or lendingtree.com. Joe can go to a live mortgage broker who will try to price shop one bank against the next and earn their commission by getting Joe a cheaper price. Joe can go directly to a bank and hope for the best.
The price Joe gets depends on lots of things:
- how much money he puts down
- loan to value ratio (loan size to value of the home)
- other debts Joe has
- Joe’s credit rating
- Joe’s income
- Joe’s guarantors (whether Joe’s mom and dad will guarantee the loan)
- the speed at which he is willing to pay down the loan
- type of loan (fixed, ARM, etc)
- whether or not he wished on the evening star for a low price