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In today’s world, buying a house is a dream for many, but with rising mortgage rates, that dream can quickly turn into a financial burden. While there are many factors to consider when securing a mortgage, one critical step many home buyers overlook is shopping around for the best interest rate. Just like comparing prices before buying a car, getting multiple quotes from different lenders can save you a significant amount of money over the lifetime of your loan.
According to a recent LendingTree survey, 54% of home buyers who recently purchased a house only obtained a quote from a single lender. This means they might unknowingly pay hundreds of dollars extra monthly on their mortgage, translating to thousands of dollars lost over the years.
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- Don’t just go with the first lender you talk to, just like you wouldn’t buy the first car you see.
- Once you have quotes from a few lenders, you can use them to bargain for a better rate with your preferred lender.
- While checking with your bank for a mortgage rate is good, continue. Many other lenders exist, and they might offer a much better deal.
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Don’t Make a Mistake to Overpay on Your Mortgage for Your Dream Home
The potential savings from shopping around are undeniable. LendingTree found that borrowers who received quotes from multiple lenders saved between $600 and $1,200 annually on their mortgages. That’s a significant amount that could be used for anything from home renovations to building a retirement nest egg.
Another study by Freddie Mac revealed even more impressive figures, estimating that borrowers who compare rates from multiple lenders could save a staggering $84,000 throughout the life of their loan.
So, why aren’t more people using this simple money-saving strategy?
There are several reasons:
Some buyers might believe they’ve already secured the best possible rate from the first lender they contacted. While it’s certainly possible, it’s not guaranteed. Dedicating extra time to get quotes from a few other lenders could reveal a significantly better offer.
Another reason some buyers skip the shopping around phase is trusting their real estate agent’s recommendation on a specific lender. While real estate agents are valuable partners in home buying, their expertise often lies in finding the perfect property, not necessarily securing the most competitive mortgage rates. Feel free to explore options beyond your agent’s recommendation.
Feeling pressured by a competitive housing market can also lead buyers to settle for the first mortgage offer they receive. In a hot market where houses move quickly, some buyers might need to lock in a rate fast to avoid losing out on their dream home. However, succumbing to this pressure can be a costly mistake. Taking a breather and getting a few quotes before deciding can put you in a much stronger financial position in the long run.
Finally, brand loyalty can sometimes be a barrier to shopping around. Many people have a long-standing relationship with their bank and assume they’ll offer the best mortgage deal. While checking with your bank is a good starting point, it should continue your search. Numerous lenders are out there, each with their rates and terms, so it’s crucial to compare options before committing.
Interestingly, the LendingTree survey also revealed a generational gap when purchasing mortgages. Baby Boomers (aged 60 to 78) were the most likely to skip this step, with a staggering 72% relying solely on the first quote they received. Generation X (aged 44 to 59) followed closely behind at 59%, while Millennials (aged 28 to 43) were the most likely to shop around, with only 38% relying on a single quote.
Shopping around for a mortgage is a simple yet powerful way to save money. Here are some actionable steps you can take to ensure you’re getting the best possible deal:
- Aim to get quotes from at least three different lenders. This will give you a broader perspective on the interest rates currently available in the market.
- Don’t just focus on the interest rate – compare closing costs. Closing costs are fees associated with obtaining a mortgage and can vary depending on the lender.
- Once you have a few quotes, don’t hesitate to negotiate! Knowing what other lenders offer can give you leverage when securing a better rate from your preferred lender.
By dedicating a little extra time and effort to shop around for a mortgage, you can get the best possible rate and save yourself a substantial amount of money in the long run. So, don’t be shy – start contacting lenders and comparing quotes today! Your future self will thank you for it.
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