What if I told you that 49% of people do not shop around when getting a mortgage? What if I also told you that 77% of people only apply to one lender? Doesn’t it seem wild that so many people who wouldn’t dream of buying a car or smartphone without hours of online research just accept the first offer their mortgage lender or broker makes? Many people going through the process also think that all lenders offer the same rates and costs. With a little more effort by getting a second opinion, homebuyers can end up saving thousand upfront and over the life of the loan. With today's technology, it doesn't take that much more time. By getting multiple quotes you can:
A report from CFPB gives an example based on a $200K loan:
“… our research showed that a borrower taking out a 30-year fixed rate conventional loan could get rates that vary by more than half a percent. Getting an interest rate of 4.0% instead of 4.5% translates into approximately $60 savings per month. Over the first five years, you would save about $3,500 in mortgage payments. In addition, the lower interest rate means that you’d pay off an additional $1,400 in principal in the first five years, even while making lower payments.”
That’s a $4,000 difference over just the first five years. If your 30-year fixed-rate mortgage runs its term, that’s 360 months. So, a $60-a-month savings would save $21,600, plus gives you a faster paydown of your principal debt.
Many borrowers feel weary about applying with several lenders because they are worried that their credit will be heavily impacted. Yes, your credit score will take a small hit, but not every time. As mentioned in our blog about credit scores, you have 30 days until your score is affected again.
Mortgage companies treat multiple hard inquiries for these as a single event, so you take just one small hit whether you get one or two mortgage quotes or a whole pile of them. And, providing everything else in your credit report remains good, that small hit should typically fade away to nothing within a few months.
Another huge step in the process is to always compare costs. Some lenders are sneaky and offer you an ultra-low rate only by inflating the closing costs you’re going to pay when you finally buy your new home. You may well find discount points buried in some quotes. These are simply a way to buy a lower mortgage rate through an upfront payment. At Loan Pronto, we pride ourselves in not only customer service, but that we always, no matter what, have zero lender fees!
Remember to always shop your mortgage and get a second opinion with Loan Pronto!
Take a look at our checklist to see the basic documents you’ll need to apply.