Mortgage Shopping 101: A How To
It looks like first-time homebuyers have been making better strides when it comes to comparing mortgage rates; 29% of first-time homebuyers shopped around for 2 or more mortgages, while 20% of repeat buyers did the same.
Just like when it comes to comparison-shopping for your coffee machine on Amazon, it’s important that you do the same for your mortgage.
A new study from Lending Tree found that comparing mortgage rates could equal a median lifetime savings of $40,959 in interest on a $300,000 loan. That’s a lot of cash.
But shopping around for mortgages can be intimidating – here’s how to do it:
Begin Shopping Early
Don’t wait until the last possible moment when you have deadlines coming up – this will cause you to jump on the first offer before you really have a chance to read through the fine print. Shop around with three to four different lenders before meeting with a real estate agent to have a better idea of what you can borrow.
Interest rates are important, but a lot of consumers forget about the fees. You’ll want to figure out the monthly payment you’ll be comfortable making; while a lender offering a 4.2% interest rate seems better than the other offering 4.5%, the lower lender might have higher overall fees.
Origination fees – also called an underwriter fee or processing fee – is another cost that will vary from lender to lender. Once you have the loan estimate, you should be able to view the breakdown of these fees. You can also ask each lender for an official written loan estimate of rates and fees.
Lock your Rate
After you have your home under contract, you’ll want to double check with the lenders you’ve previously talked with to see if any of their terms have changed (remember, mortgage rates change frequently). Once you have decided on the lender you want to go through, ask them to lock the best interest rate that works for you, so you’ll avoid any changes that might happen while the loan is being underwritten.
Understand Your Finances
Lenders will look at your credit score history – understand where you fall in this range. The higher the credit score, the more buying and bargaining power you will have.
Check out Alliance Title’s Buyer-Seller Guide for all the tips and advice you’ll need when searching for your dream home!