Deciding on a mortgage is a major financial decision. A difference of just a few percentage points might sound small, but it would result in many thousands of dollars of payments over the course of a mortgage, so it pays to shop around. You should think carefully before signing up for a mortgage from Bank of America or any other bank.
First, let’s talk about the basics of mortgage rates. There are several determinants to these rates. First of all, all banks base their rates on basic economic conditions. The economy and the Federal Reserve provide the basic context for all of banking, so it makes sense that those things also factor into mortgage rates. When the Federal Reserve keeps its rates low, mortgages are also low. This typically happens in economic downturns. The bottom line is that these things are out of your control- they affect all banks in the same way, so shopping around won’t let you avoid them.
But there are other factors that you can control. Each bank customizes mortgage rates to their customers. Depending on the amount of money you want to borrow, your credit history, the location of the house, and a few other factors, banks make slight adjustments to the rate on your loan. Remember, every little bit helps when it comes to a mortgage, because that rate applies to a large principal that you pay off over many years. Banks take all these personal factors into account because they are trying to charge a higher rate to people who are more likely to default on the loan. They need to cover their risks. If they charge more to people who are higher risks and less to people who are less likely to default, the bank can make more money.
In addition, banks need to cover their costs so they can make a profit. Some banks are more efficient than others, and it works in different ways. For example, large banks have better technology and data, but small banks have a personal connection to the customer. That’s why you need to be careful and shop around. Different banks have different costs, and they also weight your personal factors in different ways. If you go to several different banks and they offer you different weights, that’s a good opportunity to save a lot of money. There’s a lot that goes into deciding on a rate- some of it comes from the economy, some from the bank, and some from you.
Be careful, though. Make sure you are comparing mortgages of the same maturity, or length. Longer mortgages have lower rates, but you still wind up paying more in the end. If you compare a fifteen year mortgage to a twenty year mortgage, the longer one will have a lower rate. However, that doesn’t make it a cheaper mortgage. Make sure you are comparing apples to apples: get a quote from different banks for a mortgage of the same length.
If you keep these ideas in mind, you will have no trouble locating the best mortgage rate. Bank of America is one of the biggest mortgage providers in the country because of its sheer size, but that does not mean that it is always the best choice. You should be careful to investigate many different banks and see if they can beat Bank of America. It doesn’t always happen, but it also doesn’t take that much time to test it out. Considering the big savings that you can pick up by getting a lower rate, it is well worth the time. It can’t hurt to spend a few extra days looking around.