August 10, 2020
3 MINUTE READ
Approximately 75 percent of consumers say that they like to shop around before making a purchase. And, given the fact that a mortgage is easily one of the biggest expenses in a person’s lifetime, you may be surprised to learn that many people don’t shop around before choosing a lender.
Shopping for multiple quotes can save borrowers thousands of dollars… but how? Let’s take a closer look.
Despite the tremendous cost savings, more than 1 in 3 home buyers today say that they did not shop around before selecting their mortgage lender. Of those who obtained multiple quotes, most did so before signing a contract on their new home.
Non-financial priorities when selecting a lender seem to explain, at least in part, the choice not to compare multiple quotes. Many recent homebuyers who received only one quote reported doing so because they were more comfortable with that particular lender. Mortgage non-shoppers also reported much less concern with competitive terms when selecting a lender, citing other non-financial priorities.
Although homebuyers who only got one quote didn’t typically express regret with their decision, most still report trying to negotiate mortgage terms — with somewhat less success — than those who did shop around.
What does this mean? The answer is simple: by not shopping around to give themselves leverage when negotiating their mortgage, too many homebuyers are leaving money on the table.
Other types of consumer purchases, such as household goods, can be much easier to research, shop for and compare online, which helps explain why consumers are more likely to shop around for these types of products. Even just evaluating the basic “price” of a mortgage can be overwhelming to many consumers, further complicating the process.
Research has shown that consumers from all backgrounds lack knowledge about the basics of a mortgage. Helping to build that knowledge is an important step toward promoting mortgage shopping — and better outcomes for consumers. Simply knowing that you can save thousands of dollars by getting multiple mortgage quotes may be just the motivation more homebuyers need to comparison shop.
Mortgage rates can vary greatly, both from day to day and from lender to lender. Therefore, it stands to reason that if borrowers search only once, there are some who will get lucky and get a low rate and some who will get an average rate — but this means there are also the unlucky ones who end up paying a high rate.
On average, home buyers who get one additional quote will save anywhere from $966 to $2,086 over the course of their loan. Once that number reaches five additional quotes, buyers can expect to save between $2,089 and $3,904. If you really shop around, buyers can save as much as 0.75 percent — and while this may not sound like a lot, over the course of a mortgage, it can be a real game changer.
In today’s market, rate shopping is especially important, as interest rates are at their lowest. Shopping around for your mortgage and getting the lowest rate possible will help to expand your budget and allow you to get more bang for your buck in a house.
It’s clear that shopping around for a mortgage can save you a significant amount of money… but how do you effectively mortgage shop? What can you do to get the best deal in today’s hot market? From checking out fees to remaining consistent, here are some of the top tips recommended by industry experts to get the best mortgage rates: