New research in the market shows that potential homeowners can save an average of $1500 just by getting one more quote when applying for a mortgage loan. With five quotes from different lenders, they could save up to $3000 or more. Despite this, reports show that buyers aren’t doing this. Many buyers don’t realize that the rates offered by lenders vary widely.
It’s clear that shopping around can save you a significant amount of money. But how do you go about shopping around? What can buyers do to get the best deal in today’s highly competitive mortgage market? Here are some pro tips from industry experts to consider:
Pay Attention to Mortgage Fees
When shopping for a mortgage, you’ll want to figure out the monthly payment you’re comfortable paying, instead of focusing too much on the interest rate. For instance, a borrower may opt for a lender charging a 4.15% rate over another mortgage lender offering a 4.25% rate, but the one offering a lower rate could be costing the highest title & closing fees in the market.
Get a full break down of the mortgage fees and costs. For instance, origination fees will vary from lender to lender. In fact, lenders will have different names for these fees, such as underwriter fees, processing fees, etc. According to OnQ Financial, whether you want an FHA loan, USDA loan or another type of loan, you must review the costs and fees once you get different loan estimates from lenders.
Be Consistent and Start Shopping Early
When it comes to mortgage shopping, you must think ahead. Before you even meet with a realtor to help you with the home buying process, shop around with at least three or four different lenders to find out what they are offering. You have to be sure that you’re comparing apples to apples. Ensuring consistency is critical when shopping around.
Say you’re looking for a 15-year mortgage loan. You need to know what the interest rate for the 15-year fixed rate is, with each mortgage lender or bank you approach. This will ensure you’re getting estimates for the same kind of product. The last thing you want is complicating your mortgage shopping process. The earlier you start shopping, the better.
Know Your Specific Scenario
What kind of home do you want to buy? What is your credit score? What’s the purchase price? How much down payment can you afford? What loan amount are you looking for? Understanding your scenario is the key to getting the best mortgage loan. With a bright idea of what you need, you can approach different loan officers from different lenders and say. “Here’s my scenario. Based on these parameters, what can you offer me on a 30-year fixed rate?”
Your goal here is to know what options you have. Many home buyers jump into the process without asking themselves what they need and whether they’re ready. A Forbes article notes that if you have to work out ways to improve your credit score or increase your down payment amount so you can get lower interest rates for your mortgage, go ahead and do it.
Lock in Your Rate
Once you have your dream house under contract, make sure to double check with each mortgage lender to find out if their mortgage terms or fees have changed. Once you’ve compared your options, ask to lock in a rate that best works for you. By doing so, you’ll avoid any potential changes in fees or costs while the loan is being processed or underwritten.
Move From Variable Rate
If it comes to a point where your fixed rate mortgage comes to an end, then you can get caught up with a variable rate. Because it isn’t fixed, and as the name suggests will vary, then it can mean that the payments can increase. And if they increase, then it is more money out of your regular budget. So if you do have a fixed rate that is coming to an end, be proactive and do something about finding a new rate. You don’t want to pay more than you need to, as you want to still make the payments and cover costs, rather than miss payments as that can negatively impact your credit score that you might be looking to improve. So check what rate you are on, when it expires or renews, and make sure that you are paying what you can afford.
Consider Working with a Mortgage Broker
When you’re working with a mortgage lender or bank, you’re only dealing with one institution’s loan product. With a mortgage broker, you’re getting access to products from multiple lenders. Mortgage brokers can shop the ideal loan for you and show you the interest rates available from different lenders and guide you in choosing the best one for your situation. Just make sure to select the right mortgage broker by asking the right questions.
By understanding these pro tips, you’ll find it much more comfortable when shopping around for a mortgage loan that suits your needs. Comparison shopping is vital if you want to make huge savings.