It pays off to shop around for mortgage lenders when it comes to better loan rates, terms, and savings. Applying for a mortgage can be very hassling, with all the paperwork and processes, and it’s not even certain that these prospects would respond, but one thing’s sure when you shop around—you can save a great deal.
One study conducted by Freddie Mac shows just how much borrowers miss out on when they don’t look around. Take, for instance, a borrower with a typical debt of $250,000 who got an extra rate quote. The borrower then claims saving an average of $1,435 throughout the life of the loan.
A few thousand dollars might not sound a big deal, especially when it’s spread over thirty years of the mortgage, but come to think of it—there are still so many homebuyers that find it difficult to save for their down payment and closing costs. For example, you’ve saved $3,000 from the overall loan price. That can already amount to possibly two months of loan payment.
It Pays to Shop Around
There are many kinds of lenders, such as credit unions, regional banks, online lenders, and big banks. Shopping around, you can get lower mortgage rates in the form of better interest rates and loan terms.
But saving some money is just one of the benefits when you look around for a mortgage lender before purchasing a home or refinancing a mortgage. With it, you can also know the lenders’ origination points, fees, third-party fees, and mortgage insurance premiums.
Talking to several lenders beforehand will let you know how they process applications for loans, how long they usually take to close them, how they communicate, and their philosophies for customer service. Overall, you can compare the pros and cons of each loan offer.
When you’re planning to stay in one place for a long time, you can greatly benefit from mortgage points, also known as discount points, which you pay at an upfront cost to lower the loan’s interest rate. Usually, one point would equal one percent of the loan amount, but lenders vary in structuring their points.
Find Mortgage Lenders with the Best Loan Offers
Buying a home means a commitment for the long haul since you’ll be in it for 15 to 30 years. It makes sense that you shop around and find the best rates. Here are tips for finding the right mortgage lender; hence, the best mortgage rate:
Get your mortgage pre-approved
The very first step is to get a pre-approved mortgage so you can get a solid rate and even increase the chance of your offer getting accepted. Every time you apply for a mortgage, the lender will vet you thoroughly in several aspects, including your job, income, credit score, and finances.
Inquire for lender options and rates
If you check your significant documents, your lender will judge your ability to repay and pass their underwriting criteria. Inquire from various lenders about their interest rates and terms; your goal is to find the one with the best offers.
Many homeowners tend to skip comparing loan options and rate offers, ignoring that they might be paying large interests throughout their loan.
Know the various types of mortgage lenders
Mortgage lenders abound, so borrowers will never run out of options. They include credit unions, retail banks, local banks, big banks, online lenders, and more.
If you worry about credibility, big banks are your choice. They’ve offered millions of mortgages so that you know you can get the best interest rates as they have access to low-cost capital and can even bundle their services, such as financial planning, checking, and savings.
The huge difference between small and big banks is service. Since big banks process many mortgage applications every week, waiting for closing can get as long as 45 days.
On the other hand, local banks offer the same options as big banks, but the service may be better because you get quicker and more familiar with customer service. Plus, you can expedite the approval of the loan.
Many verified online lenders can offer lower interest rates and fees, even for those with unusual financial situations and low credits. Just make sure to vet any lenders before you apply.
Extra Tips for Getting the Best Mortgage Rates
Ask for recommendations from your family and friends, save time by seeking the help of a mortgage broker, avoid falling into scams, especially if an offer sounds too good to be true, and vet the brokers and lenders.