Mortgage Interest Rates Vary By Lender – How To Compare Offers
Shopping around your mortgage is critical – at least if you want to save money.
According to Freddie Mac, getting just a few extra quotes for your mortgage can save you thousands of dollars in the long run. It also means a lower monthly payment and a more affordable home to secure your financial goals.
Why exactly does looking for a lower interest rate work? It all comes down to mortgage lenders. Each lender offers homebuyers different rates and payment methods and unless you contact more than one at a time, you won’t be able to see the full range of offers you might be eligible for.
Here’s what John Graff, CEO and Broker at Ashby & Graff Real Estate says: “Think of it this way: if you were thinking of buying a pair of shoes online, you would probably check out one or two online retailers have the best. price, who offers free shipping and whether there are any coupons available. If you have to go through all of these problems to save $ 20 on shoes, it probably makes sense to do it for your mortgage where you can save thousands or even tens of thousands. “
Freddie Mac’s research shows that getting just two mortgage interest rate quotes can save you money, but for the absolute best deal, you should aim for five quotes.
To do this, you will need to contact at least a few mortgage lenders (your personal bank or credit union included) or use a tool like Credible to get pre-approved for multiple quotes at once.
From there, pick a few lenders you like and fill out their full application – ideally on the same day, if possible. This ensures that your offers are based on the same market conditions. Find out what kind of personalized rates you’re entitled to in minutes fill in your information online for free.
Once you file an application, the lender will give you a loan estimate statement within a few days. This is what you will use to compare offers and choose the best one.
Using loan estimates to compare mortgage offers
“The best way to compare mortgage products is to make sure you are comparing apples to apples first by comparing similar offers, not one. 30-year fixed rate with one lender and an adjustable rate of 5/1 with another, ”said Graff. “Once you’re sure you’re comparing similar products, it’s easier to look at the APR. The APR includes the rate the lender charges you plus certain fees associated with obtaining a mortgage. In the past, unscrupulous lenders cited an attractive annual interest rate to shock borrowers with a bunch of high fees. Comparing the APRs of similar loan products is the best and easiest way for you to feel confident when shopping for a mortgage. “
You should also look at the individual fees a lender charges you – specifically set-up and subscription costs. There is also a “comparisons” section that details the cost of the loan over the first five years, as well as the amount of interest and principal you will have paid by that time. This information also provides a good barometer for comparison.
Make loan purchases easier
Using a rate buying tool like Credible can help streamline the mortgage submission process, just like using a mortgage broker.
A mortgage broker can help serve as a personal shopper, helping with rate comparison across the spectrum of lenders.
Make sure you have a voucher mortgage calculator handy before you start your mortgage search. This can help you better visualize your options, as well as the monthly and long-term costs associated with each.