1-in-3 mortgage applicants refuse huge savings
Mortgage rate shopping is a chance to make money. Maybe big money.
You might think that’s enticing, but according to a new Fannie Mae study more than one-third of homebuyers don’t shop around.
That’s a shame.
Comparison shopping is quick, easy, online, and potentially a big money saver. You can do it right here.
Fannie Mae’s National Housing Survey explains that “a mortgage is one of the biggest expenses in a person’s lifetime and shopping for multiple quotes can save borrowers thousands of dollars.” But if big savings are possible, why is it that more borrowers don’t shop around?
Mortgage applicants don’t shop around and don’t care that they paid too much
The study shows interesting but head-scratching findings:
- Non-shoppers were pleased with the first lender they met
- Some non-shoppers were more concerned with non-financial priorities such as the lender’s reputation, an existing relationship, and convenient branch locations
- Non-shoppers were less likely to negotiate such matters as interest rates, discount points, mortgage origination fees, appraisal fees, and prepayment penalties..
- Non-shoppers were happy with their decision. The study found that 76% of non-shoppers did not regret their decision to only speak with one lender
That last point is intriguing. These mortgage consumers knew they accepted a too-high rate, but didn’t care. Hmmm.
Make over $5,000 per hour by rate shopping
Let’s say it takes an extra four hours to speak with several lenders. So how much could you save by spending that four hours? As it turns out, a lot.
A Consumer Finance Protection Bureau (CFPB) report says consumers can obtain a 0.50% lower rate by calling a few lenders instead of just one.
So, you decide. Is rate shopping worth it? Only if you make less than $5,250 per hour in your day job.
On a $200,000 loan, says the report, that equals $3,500 in the first five years. At that point, you would make $875 per hour assuming a 4-hour rate-shopping commitment.
But if you keep that loan for 30 years, you stand to save more than $21,000. Now your pay goes up to $5,250 per hour.
So, you decide. Is rate shopping worth it? Only if you make less than $5,250 per hour in your day job. Which is most of us. If your hourly pay is more than that, feel free to go with the first mortgage quote you receive.
Start your mortgage rate shopping here.
You shop for small-ticket items, so why not your biggest ticket item ever?
Before you buy a car, computer, or smart phone you shop around. You shop for clothes, brake jobs, and food. Why not mortgage financing?
Buy a home for $300,000 and the cost is much more than $300,000 including financing costs. At a 3.8% interest rate, the total cost over 30 years for principal and interest is more than $485,000.
You probably wouldn’t buy a $485 iPad without shopping around, though its’ 1/1000 the price.
Yet, you probably wouldn’t buy a $485 iPad without shopping around, though its’ 1/1000 the price.
If you shop for a home why not for a mortgage? How easy is it to comparison shop for mortgages? Getting a mortgage today is a lot easier and faster. Even just a few years ago we didn’t have bots, automation, and Loan Estimate forms. You can start right here.
The old hassles of mortgage rate shopping
There, we said it. Mortgage rate shopping can be a hassle. People will poke around in your business. That time you missed a car payment was way in the past.
There is paperwork to gather. One study from several years ago found that the typical mortgage application included more than 500 pages of documentation.
Luckily lenders have digitized things and can accept uploaded PDFs in most cases. No more making 100-page copies of those tax returns.
Plus, many lenders simply need a W2 and a paystub to verify income unless you’re self-employed.
Mortgage rate shopping made easy
Mortgage rate shopping is not only justified by potential cash savings but also by a new reality.
It’s easier to apply for financing today than in the past.
It used to be that borrowers had to provide bank statements for several months. Today – with your permission – lenders can get account statements directly from your bank.
Today – with your permission – lenders can get account statements directly from your bank.
Lenders used to want past tax returns. Now, in many cases, they can just get tax transcripts from the IRS. Appraisals used to be expensive and took time to create. Today – again in many cases – you can get an Automated Valuation Model (AVM) instead.
For those introverts out there, it’s now possible to apply for a mortgage and never speak with a loan officer. Just apply online and a bot will be happy to work with you day or night.
The government has made loan shopping easy. Apply for a mortgage and within three business days and the lender must provide a federal Loan Estimate form (LE). This form allows easy comparisons among lenders.
No longer scared of rate shopping? Start here
Mortgage rate shopping doesn’t have to be scary. And it can pay off big.
If you’re looking to buy a home or refinance, get connected with a few lenders at the link below.
Time to make a move? Let us find the right mortgage for you
