written by Jenny Hatch, mortgage loan officer, Chase Mortgage
People search endlessly for the best price on flights and hotel rooms before traveling, read the grocery ads looking for the best price on soda, and drive out of their way to save a few cents per a gallon on gasoline. But for some reason, when it comes to getting a home mortgage, the idea of shopping around might not even cross their minds. Why? When you buy a home, you’re committing to one of the biggest expenditures of your life. You’ll have your mortgage payment for 15, 20, or 30 years, so it’s smart to shop around to find the best mortgage lender out there.
The Consumer Financial Protection Bureau surveyed 5,000 home purchasers a few years ago and found that nearly half of all buyers didn’t even “seriously consider” more than one lender, and 77 percent applied to only one.
Every bank or broker is different and has different rates and fees offered. Having the right rate for you can cost or save you thousands of dollars. In fact, according to research from Freddie Mac, the average borrower could save $1,500 upfront just by getting one extra rate quote when applying for their mortgage, and save $3000 or more if they get five quotes, plus potentially thousands more over the life of the loan.
Here are four tips to help you shop for the best mortgage lender:
- Get your credit score in shape. The higher your credit score, the better rate you’ll get. You do not need to have your credit pulled until you are sure you want to proceed, however knowing this plays a big role in the rates and costs associated with your mortgage. You can typically lock a rate for about 30 days.
- Know you have options. Credit unions, mortgage bankers, correspondent lenders, savings and loans, and mutual savings banks are all options for lenders. You’ll want to consider each of their overhead costs, which will likely be passed on to their customers. Also read customer reviews about their services. Many realtors may tell you they have a good relationship with a specific lender, but the benefits may only come back to them. Do your research and know you have options.
- Get pre-approved for your mortgage. Boost your chances of having your offer accepted when bidding against other buyers by getting pre-approved. This shows that you are a serious buyer and will also save you time later when it comes times to process your loan.
- Consider the fees and ask the right questions. Find out about requirements and fees, including costs beyond principal and interest payments. Fees to consider, and that can vary greatly, include origination fees, administrative fees, underwriting fees, and even appraisal fees. Ask your potential lenders what their fees are, so you can be sure you are getting the very rates and lowest fees you can on your purchase or refinance. When shopping for a mortgage lender, compare closing costs at the same mortgage rate on the same day.