President Ronald Reagan once said, “I’ve always felt that the nine most terrifying words in the English language are, ‘I’m from the government. And I’m here to help.’” Even though there may be some truth in that statement I am happy to inform home buyers of valuable mortgage help from Uncle Sam. It comes in the form of a website that provides simple and significant resources for finding the best rate on a mortgage.
A Surprising Survey
It may surprise you to learn that a recent study conducted by two federal agencies (the Consumer Financial Protection Bureau and the Federal Housing Finance Agency) revealed that nearly half of borrowers don’t shop around for the best rate before applying for a mortgage. That doesn’t make a lot of sense when you consider that a home purchase will be the most significant purchase most people will ever make. Why would someone carefully shop for the best deal on a large screen TV but not shop carefully for the best deal on a home loan?
Maybe it’s because:
- Most people don’t realize that all lenders do not offer the same interest rates
- Most people don’t know how to shop around for the best interest rates
- Most people don’t realize how much a little difference in interest rates can save them over a 30 year period
An Example to Illustrate
Let’s assume you’re purchasing a $200,000 home. You’re putting 5% down ($10,000) which means the loan is for $190,000. You have low debt and a good credit score so you have
two lenders eager to lend you the $190,000. But their interest rates vary just a bit:
- Lender A is offering 3.5%
- Lender B is offering 4.125%.
Seems pretty close, doesn’t it? That’s only a .625% difference.
It may surprise you to learn that over 30 years the interest rate of 4.125% costs $24,354 more than an interest rate of 3.5%. That’s a significant amount of savings simply by doing a little educated shopping.
So how did I come up with the all of the numbers in the above example? Easy. My Uncle Sam helped me. And he’s ready to help you. The Consumer Financial Protection Bureau (CFBP) has created a website (www.consumerfinance.gov/owning-a-home/check-rates/) where you can crunch those kind of numbers quickly and easily. The CFPB provides this free tool to help home buyers make more informed mortgage decisions. Their data is provided by real lenders and is updated every evening of every business day. The lenders include a mix of large banks, regional banks, and credit unions. You can even see how interest rates vary based on your credit score and the state you live in.
In addition to the website’s number crunching ability the CFPB’s “Know Before You Owe” program provides an interactive online toolkit designed to guide you through the home
buying process from start to finish. “Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating,” said CFPB Director Richard Cordray. “The Know Before You Owe ‘Owning a Home’ toolkit makes it easy to see how shopping for a mortgage can translate into big dollars saved in the long run. We want to enable consumers to be more savvy shoppers.”
Ready or Not
Are you ready to buy now? The website has some great tools to guide you through the process. Are you several months or more away from a purchase? The program offers tips of things you should be doing now to increase your ability to get a great rate when you’re ready to buy.
So take the time to check out this new website provided as a courtesy of your Uncle Sam. It’s quick, easy and very informative. And it can help you save some serious money on your mortgage.
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