Why it Makes Sense to Shop for a Mortgage
“One call could save you $1,500” – Freddie Mac research
Mortgage interest rates are at historic lows and the trend will likely continue as the nation deals with this COVID-19 pandemic. If you’re a serious homebuyer or if you want to refinance your home, you might ask yourself: does it still make sense to shop for a mortgage? The simple answer is a big yes. Shopping and comparing mortgage interest rates from several lenders can help you save hundreds or even thousands of dollars over the life of your loan.
A mortgage interest rate is just the tip of the iceberg
For many, now is the best time to buy a home or refinance their mortgage as interest rates continue to plunge because of the ongoing pandemic. While interest rates remain competitive, keep in mind that the interest rate you’ll get also depends on your credit, finances, and the kind of loan that you’re interested in. When you obtain a loan estimate from a lender, you’ll know that there are other costs like points and associated fees when taking out a mortgage. However, if you obtain a loan estimate from another lender, you may realize that the first loan estimate you get is not the best you can get.
A 2018 Freddie Mac research revealed that on average you could save $1,500 over the life of a loan by simply getting another rate quote. If you’re able to shop for five lenders, you could save an average of $3,000. The research demonstrated that consumers significantly reduced their chance of having a high interest rate on a mortgage if they shop with multiple lenders.
Shopping from several lenders could be overwhelming because there are lots of costs and fees associated when taking out a mortgage. If you’re ready to shop for a mortgage, consider using the Federal Trade Commission’s mortgage shopping worksheet so you can easily compare lenders’ offers.
Shopping helps you negotiate for a much better deal
Your ultimate goal in mortgage shopping is to save money. You are then able to compare offers from several lenders. As you shop for a mortgage, you’ll realize that some lenders may offer you the same interest rate and costs. To narrow down your options, consider negotiating to get the best offer a lender has to offer. Ask the lender if you can get a better deal from the quote given by the other mortgage company. When negotiating, make sure that the lender doesn’t reduce some costs only to add it up to other items in your quote.
If you think you’ve exhausted everything you can negotiate and think you’re getting the best offer, consider locking-in the rate with the lender. Locking in your rate for a period of time ensures that you will get the same interest rate and terms you’ve initially agreed with the lender. Typically, some lenders may charge you a fee when you lock-in your rate but it may be refunded at closing.
Most experts would suggest that you shop for a mortgage whether you have a good or bad credit score. However, keep in mind that it doesn’t guarantee that you’ll benefit from shopping with multiple lenders. Sometimes, a lender may offer you the best rate in your first attempt.
Shopping won’t hurt your credit score
When you shop for a mortgage, lenders will only make a soft inquiry on your credit to view your score. Even if you shop for multiple lenders, it will not affect your credit score as long as you did all your shopping within 30 days. The only time your credit will be negatively affected is when you actively apply for a mortgage because that’s the time the lender will pull your credit, known as the “hard inquiry”.
Speak with a LendUS loan advisor today
Shopping, comparing, and negotiating a mortgage makes sense to help you secure the most favorable rate that a lender can offer. If you’re out to shop for a mortgage whether you’re buying a home or refinancing, a LendUS loan advisor can help you. Get in touch with us today to learn more about your options.