Mortgage basics: “How to shop for a mortgage.”
Every now and then I focus on mortgage 101 because it seems the obvious stuff isn’t always so obvious.
While you would think that shopping for just about anything is relatively straightforward, it’s often not.
This is especially true of mortgages, which come with added confusion and potential pitfalls.
Let’s discuss how best to shop for a home loan to obtain the best interest rate with the lowest fees. Oh, and ensure you wind up with a competent lender.
First Off, Make Sure You Actually Shop!
It’s cliché, but it’s true, and bears repeating. Very few consumers shop around for their mortgage. And it can cost them, a lot.
In fact, yet another survey, the latest from Zillow Home Loans, revealed that prospective home buyers spend more time researching their next car purchase or vacation than their mortgage.
This despite the fact that the mortgage will be paid for the next 30 years in some cases, and weigh heavily on their pocketbook.
These individuals also indicated that they spend about the same amount of time researching TVs to buy as they do mortgage lenders.
I guess people watch a lot of TV, so it is pretty important to get a quality set. Jokes aside, this is a problem if you want to save money.
Why? Because there are real studies that prove that shopping around is the key to saving money on your mortgage.
Of course, Zillow’s survey also found that 72% of prospective home buyers haven’t shopped around for a mortgage, nor do they have any plans to do so.
As for why, the top reason is fear of hurting their credit score, which while somewhat valid, shouldn’t hold you back.
The second reason is simply being “happy with the first lender,” followed by it taking too much time and effort.
There’s also the belief that all lenders offer the same rates, which is far from the truth.
Oh, and some folks are apparently embarrassed to share their financial details, but will pay extra to keep things hush hush.
Mortgage Rates Can Vary By 1% or More Between Lenders
To the point about all mortgage lenders offering the same rates, it’s not true. Some lenders may offer similar rates, but others may not.
And if you contact that first lender you’re “happy with” who happens to offer a higher rate than the competition, you could miss…