In today’s competitive market, it’s a good idea to shop around for the best options for a mortgage loan. While it takes some legwork, the payoff will be worth it.
Lowering your rate even a quarter of a point can save you hundreds of dollars each month and tens of thousands over the life of the loan. Here's an example that puts the savings in perspective: with a $400,000 mortgage, the difference from a 7% to a 6.5% rate would save you almost $50,000 in interest over a 30-year term—roughly enough to pay for a year of private college.
As you can see, the payoff of doing your research in the beginning can be significant. By following a few simple tips, you can simplify the process of shopping for a mortgage while still reaping the long-term benefits.
Look Beyond Advertised Rates
Looking at advertised rates alone is not a good way to shop around as some lenders typically display the lowest rates they offer as a headline to attract leads, but the actual rate you may be offered can vary dramatically depending on your own financial situation and the kind of loan you’re looking for. Many advertised rates also include mortgage points—meaning you would need to pay an extra upfront fee.
Compare Based on a 30-year Fixed Rate
You want to make sure that when you compare different lenders you are comparing apples to apples. If lenders give you quotes based on different mortgage products, you won’t be able to tell which one is giving you the better deal. In the current market, over 92% of customers select a 30-year fixed rate loan, so it makes sense to use this as a benchmark in comparing lenders.
Avoid a Credit Pull by Providing Your Credit Score
A lender does not need to pull your credit or gather extensive information from you to give you a quote. You can provide your own credit score by looking it up on any number of online tools such as annualcreditreport.com.
Any lender that will not readily offer you a quote based on the information listed below is likely an unfavorable option. Some lenders try to get all your personal information or ask you to apply prior to giving a quote, but this is not necessary. Here is the information a lender requires to give you a quote:
Purchase price
Loan Amount
Credit score
Closing Date
Get Quotes from 2 or More Lenders
After you have provided this information, the lender will email a specific quote or Loan Estimate outlining the rate and costs. It’s recommended that you get quotes from two or more lenders (like Sibcy Cline Mortgage Services) so that you can begin comparing them based on these three criteria:
Rate
Zero or No discount points
Total closing costs
Consider Other Factors when Making Your Decision
Oftentimes when shopping for a mortgage, you will end up with similar quotes from lenders and are faced with a choice. In this case, look at other factors like your relationship with the two lenders. Is there one with whom you have an established relationship? Has the experience of working with one or the other been significantly better?
You may want to give preference to a particular lender if they were recommended by your agent or a friend. In addition, it may be helpful to consider the lender’s online reviews or customer service scores.
In the end, evaluating the lender’s quotes in addition to the experience of working with them will help you feel confident that you have trusted the right partner to help you attain your homebuying goals and secure your financial future.