As you prepare to apply for a mortgage loan, there is a lot to do. You need to get prequalified and/or preapproved, you need to set your budget, and you need to make sure your finances are in order to get the best mortgage rate. But there is one additional item to add to your checklist: comparing mortgage lenders. To some that might seem like about as much fun as getting a root canal without anesthetic, but it’s actually a really important step in the process. Doing just that one simple thing can save you tens of thousands over the life of your loan.
Why Rates Differ Between Lenders
Since interest rates are reported by the federal government, many people mistakenly believe that all mortgage lenders offer the same rates.In fact, every lender will have a slightly different rate available to buyers and there are several reasons why:
- Risk assessment processes – each lender has different criteria for evaluating the risk level of a buyer. The more stringent they are in evaluating risks, the higher the interest rate will be to borrow money.
- Competition with other lenders – some lenders might be willing to offer slightly lower rates in order to win your business over their competitors. That’s why experts recommend comparing at least three lenders to see what they offer.
- Expenses and costs – as with any business, there are operating costs, and some lenders will charge higher rates to cover these costs.
Why Shopping Around Pays
The cost of your home is obviously going to influence your monthly payment. The second biggest factor behind your purchase price is your interest rate. Let’s say you get a $300,000 mortgage that you will pay off over 30 years. With a 4% interest rate you pay $205,023 in interest over the life of your loan. With a 4.25% interest rate, you end up paying $219,667. That’s a savings (or cost) of almost $15,000 with just a quarter-percent interest rate change.
There are also other variations in loan costs and fees, so shopping around can help you get a sense of whether your lender is charging a fair amount for things like the origination fees, mortgage insurance premiums, and any other third-party fees. Comparing lenders can also help you ensure that you like the people you’re working with and you trust them—unfortunately that’s not a given, some lenders are overly pushy, rude, or lack the right knowledge to help you. Buying a home is a huge decision, and having the right lender can make all the difference.
Plus a good lender will be able to provide you with several options for loans based on your individual situation. If you don’t shop around, you might not learn about all the options available to you.
Shop Today with Integrity First Lending
We are confident that if you shop around you will discover that Integrity First Lending has the best rates, low fees, and plenty of choices for your mortgage loan. Plus we have a friendly and helpful team of lenders to get you into the home of your dreams. Shop today to learn more.