Freddie Mac has gone on record of stating that the average borrower can find themselves saving approximately $1,500 by simply obtaining an additional rate quote when they submit an application for their mortgage. On the other hand, Freddie Mac says, if five quotes are submitted, $3,000 or more could be saved.
Their report also shows that buyers don’t seem to be browsing all their borrowing options and instead, less than half of them take the time to shop around for rates when they apply for a mortgage for the first time or take the step of refinancing their already-existing mortgage. Additionally, they also report that there are many customers who may not actually realize that rates can vary based upon the lending company.
Shopping around for a mortgage is perhaps the best way to help people save the most amount of money possible, but it can be difficult to know what rate shopping itself looks like, as well as what steps to take to obtain the best deal.
Here are some essential steps for kicking off your mortgage window shopping.
- First and foremost, it’s important to pay close attention to the fees that are involved. Take the time to determine how much you are comfortable with paying every month rather than focusing more on the interest rate. The lender who offers the lowest interest rate may also end up having the highest title fees and closing costs in the market.
- When you take the time to compare lenders, you will also want to take the time to compare lender fees as well. Once you have the loan estimates themselves, you will be able to review the fees involved easier. The buyer, they may believe that they are saving some money on the interest rate, but will be quick to find that they will only end up paying a higher fee upfront. Take the opportunity to request a written loan estimate of fees and rates from each lender that will be based on your specific situation.
- When speaking with lenders, always ask what the interest rate for a 30-year fixed rate mortgage is. This will let you know that you’re being quoted for the same type of product.
- No matter what, always start early than you think you’ll need to with shopping for mortgage rates. Prior to meeting with a realtor, take the time to speak with approximately three or four lenders in order to see what they are able to offer you. This will give you a good idea as to what type of home will fit within your ideal budget.
- Conduct some research regarding your specific financial situation and housing needs. Once you’ve made some notes, schedule an appointment with a few lenders and present everything to them, making sure that you make clear to them what your situation is and asking them what options they can provide you based on that.
- When you’ve finally secured a contract for a home, you will then want to check in with each lender to determine whether or not any of their terms have changed. After comparing all of your options, make a request to lock in the best rate that you believe will work the best for you. By doing this, you will prevent yourself from having to experience various fees and rates from changing during the loan underwriting process.
- Consider consulting with a mortgage broker in addition to a mortgage lender. When you take this step, you’ll be ensuring that dozens of lenders will be working in partnership with them in order to provide you with the best possible rates that are available.
- Paying points are things that you should also remain wary of during this entire process. Generally defined, a point is described as the prepayment of the interest of a loan. One way to help decrease the amount of the interest rate is to pay a large amount of cash upfront in the form of points. By doing this, however, you will be required to remain in the home long enough in order for something like that to be of any value, which is something that can be easily determined by your mortgage broker or lender.
Thank you for reading our real estate and homeowner’s blog. We are Weichert Realtors – Barton Harris & Co. and we’re happy to have helped you learn more about how to shop for the best possible mortgage.
