As someone looking to buy a home, you know how important it can be to shop for a mortgage. But the fact is most home buyers aren’t doing it. According to a survey of more than a thousand Americans, only a third said they always shop for the best loan rates, and 18 percent reported that they never shop around for loans. That’s according to, “Study: Most Buyers Fail to Shop for a Mortgage,” on www.realtormag.realtor.org. Experts say even a small interest rate difference of one percent can amount to thousands of dollars on a mortgage loan.
Loan shopping intel can save you money
As a home buyer, you want to save money wherever possible. So how can you find the best value on a mortgage? Here are some helpful tips to guide you through the mortgage shopping process.
Get your credit score.
As you likely know by now, lenders will leverage that credit score to determine whether you quality for a loan and what your rate will be. It’s a valuable piece of information that you should have on hand when you’re ready to discuss pre-approval for a mortgage loan, or better, six months beforehand. That way you can address any discrepancies.
Consider various mortgage types.
Comparing lending rates can be tricky if the terms differ. Conventional loans are available through private lenders and are a common choice, but government-backed loans may be an option for certain borrowers. If you’re a first-time or low-income buyer, you may be eligible for a government-backed loan such as an FHA loan.
Discuss financing options.
Have you thought about a fixed-rate mortgage versus an adjustable-rate mortgage (ARM)? In times when rates seem due to decline, an ARM may be an acceptable option, according to www.investopedia.com, “Shopping for mortgage rates.”
Compare lenders.
Comparing lenders can help you secure the rates and terms you want for your mortgage loan. Even if you have less-than-perfect credit, that shouldn’t stop you from looking at what’s available. By gathering all of the important cost information such as current rates, terms, points and fees, you’ll be able to make an apples-to-apples assessment of your options.
Ask about discounts and/or special offers.
Many buyers don’t know that they can ask if the lender is offering any discounts or special offers. As suggested by “Shopping for a Mortgage,” on www.consumer.ftc.gov, there’s no harm in comparing quoted rates and asking whether lenders can provide better terms.
Shopping for a mortgage can save thousands of dollars
It’s fascinating to see the effect that even a fractional change in an interest rate can save you over the term of a home loan, and they can significantly affect how much house you can afford. With such a large investment in the making, you can’t afford NOT to shop around.