Home Searching How To: Mortgage Shopping
The iconic TV show, Parks and Rec, brought us all a powerful line that we should remind ourselves of: “Treat. Yo. Self.”
Although this line was more attributed to shopping for material possessions – we’re asking you to use this motto when searching for the perfect home mortgage.
It looks like first-time homebuyers have been making better strides when it comes to comparing mortgage rates; 29% of first-time buyers shopped around for 2 or more mortgages, while 20% of repeat buyers did the same.
Why would it be important to shop around for mortgages, you might ask?
A new study from Lending Tree proved 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:
While it’s definitely important to look at the interest rates, you’ll also 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.
Although not a fee, “points” are another way to reduce the loan’s interest rate. These discount points might make sense to you if you’re planning on staying in the home and not refinancing for a long period of time.
Begin Shopping Early
Don’t wait until you have deadlines – 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.
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 rate that works for you so you’ll avoid any changes that might happen while the loan is being underwritten.
Know Where You Stand
Lenders will look at your credit score and history – understand where you fall in this range. The higher the credit score, the more bargaining power you’ll have.
Check out AmeriTitle’s Buyer-Seller Guide for all the tips and advice you’ll need when searching for your dream home!