Rising mortgage rates can throw cold water on your dream of homeownership. With interest rates climbing over 7% this week, that dream house can suddenly feel like a financial nightmare.
A recent survey by LendingTree revealed a surprising fact – more than half (over 50%) of recent homebuyers only got a quote from one lender. This means they might miss out on huge savings that could make their dream home much more affordable.
Experts say that by comparing rates from different lenders, you could save hundreds of dollars monthly on your mortgage payment. That adds up to thousands of dollars saved each year and potentially tens or even hundreds of thousands of dollars over the entire life of your loan. You could put a lot of extra money towards things like furnishing your new home, going on vacations, or saving for your kids’ college.
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- Getting quotes from multiple lenders (at least 3-5) can save you hundreds of dollars each month on your mortgage payment, translating to thousands saved over the life of the loan.
- When comparing lenders, consider the interest rate they offer and the lender fees involved.
- Once you have quotes from others, don’t be afraid to negotiate for a better rate with your preferred lender. Explore online lenders who offer competitive rates.
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Shop Around for Your Mortgage to Not Get Stuck Paying Extra for Your Dream Home
A study by Freddie Mac showed that borrowers who get quotes from multiple lenders save between $600 and $1,200 a year on their mortgages. That’s like getting a nice little yearly bonus just for being wise about your home loan! Another study by LendingTree suggests the savings could be even more significant – potentially reaching $84,000 over the life of the loan or an excellent $234 saved every month. That’s serious money!
Some homebuyers felt confident that the first lender they contacted offered the best rate possible. Others went with the lender their real estate agent recommended, trusting their expertise. Feeling the pressure of a competitive housing market, some buyers rushed into locking in financing with the first lender they spoke to.
Finally, over half of the people surveyed said they used a lender they already banked with for other services like checking accounts or car loans. It’s easy to stick with what you know, but when it comes to mortgages, that could be costing you a lot of money! Interestingly, the survey also showed a generational difference. People from older generations, like Baby Boomers, were more likely to accept the first offer they received (around 72% of them).
Finding the Best Mortgage Rate: Your Step-by-Step Guide
Shopping around for a mortgage might seem like a hassle, but the potential savings are worth it, especially in today’s market, where rates are rising. Here’s a simple guide to make the process easier:
Cast a Wider Net
Don’t limit yourself to banks! Consider getting quotes from mortgage brokers and banks as well. These companies specialize in finding the best mortgage rates for borrowers and can offer competitive options from various lenders.
Aim for Multiple Quotes
Experts recommend getting quotes from at least three to five lenders. This will give you a good range of rates to compare and help you find the best deal. Don’t be afraid to ask for quotes online – many lenders offer online pre-qualification tools that can quickly estimate your potential rate.
Look Beyond the Rate
The interest rate isn’t the only thing that matters. Make sure you compare lender fees as well. These can include origination fees, appraisal fees, underwriting fees, and closing costs. By comparing the rate and the fees, you can find the lender that offers the most attractive overall package. Feel free to ask lenders for a breakdown of their fees so you can make an informed decision.
Bonus Tips for Saving on Your Mortgage
Here are a few additional tips to keep in mind as you shop around for your mortgage:
Don’t Be Afraid to Haggle
Once you have quotes from multiple lenders, you can use them as leverage to try and negotiate a better rate with your preferred lender. Explain that you’ve received lower offers from other lenders and see if they will match or beat those rates. You might be surprised at how much wiggle room there can be on the interest rate, especially if your credit score is good and you have a solid financial profile.
Explore Online Options
Online lenders sometimes offer more competitive rates than traditional lenders. They often have lower overhead costs, which can translate into savings. While online lenders might not be the right fit for everyone, it’s worth checking them out to see if they can offer you a better deal.
Get Pre-Approved First
Getting pre-approved for a mortgage before you start house hunting shows sellers you’re a serious buyer and allows you to move quickly when you find the right home. Pre-approval helps you determine your budget and focus on houses within your price range. Knowing exactly how much you’re pre-approved for can also give you more confidence when negotiating the purchase price of a home.
Understand Your Credit Score
Your credit score is a significant factor in determining your mortgage rate. The higher your credit score, the better rate you’ll qualify for. Taking steps to improve your credit score before applying for a mortgage can save you money in the long run. Many resources are available to help you understand and improve your credit score, so don’t hesitate to take advantage of them.
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