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How to shop for mortgage rates when you feel rushed to lock

Casey Morris
The Mortgage Reports contributor

Mortgage rate shopping doesn’t take long

When you find a house you want to buy, your impulse may be to move quickly to lock in a mortgage rate — especially in a competitive market.

The same goes for refinancers wanting to score a record-low mortgage rate before they’re gone.

But you don’t want to move so fast that you end up with a bad deal.

Even a slightly higher rate can add tens of thousands of dollars in interest over a 15- or 30-year loan term.

There’s always time to explore your options, even if the clock is ticking. Here’s how.

Compare mortgage and refinance rates (Nov 25th, 2020)

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How to find the best mortgage rate

The first step toward finding the best mortgage rate available to you is to apply with at least three lenders.

You want to compare their rates, as well as any other fees, costs, or discounts associated with their loans.

All this information can be found on the loan estimates you’ll receive from each lender after applying for a rate quote.

To make sure you get the best deal — especially if you’re in a hurry — keep these four tips in mind.

1. Don’t accept the first mortgage rate offer you get

Even if you feel that time is of the essence, it’s important to see the rates other lenders come up with.

Interest rates and lenders’ fees significantly impact how much you’ll pay, so it’s really important to make sure you’re getting the best possible deal.

Take a look at one quick example:

Loan Amount $300,000
30-Year Mortgage Rate 2.75% 3.0%
Monthly Loan Payment $1,350 $1,390
Total Interest Over 30 Years $140,900 $155,300
Difference + $14,400

Here, a 0.25% higher rate is an extra $40 per month. That may not seem like much, but it amounts to over $14,000 if you stay for the life of the loan.

You’ll kick yourself if you get a better offer after settling for a higher rate in a panic.

2. Don’t take lender recommendations at face value

Friends and family may encourage you to work with their lender if they had a good experience. But your circumstances may be different from theirs.

It’s fine to inquire with someone your family member or neighbor suggests, but explore other options as well.

Your credit may be better or worse, and you may be looking for different loan products. Depending on a lender’s priorities — they all favor certain types of borrowers — it might not be as competitive for you as for your friend.

Lenders often mention the types of loans and special mortgage programs they offer on their websites, so dig around a bit before applying.

3. Don’t default to your bank because it’s easy

Sure, it might be nice to keep all your finances with your primary bank.

But if your current bank doesn’t offer you the best rate and overall deal, or they don’t have the right loan program for your needs, you’re better off taking out a mortgage with a different lender.

Big banks may also take longer to process applications, and they often keep traditional work hours, which may not align with your schedule.

A digital lender might offer more flexible customer service options, not to mention faster turnaround times on applications.

By all means, see what your bank can do for you. Just don’t think you’re obligated to stick with them for your mortgage.

4. Don’t be afraid to negotiate

Let’s say Lender A gives you a lower rate, but you feel most comfortable with Lender B.

There’s nothing to lose by showing Lender B the other offer and asking if they can match or beat it. Believe it or not, lenders have control over the rates they offer, and they’ll often negotiate to get your business.

Even if they can’t go much lower on the rate, they may be able to provide other discounts or incentives that make the loan worth it.

Verify your new rate (Nov 25th, 2020)

Hot to be a fast, efficient rate shopper

Now let’s talk about smart rate shopping moves.

  • Ask your real estate agent for recommendations. Real estate agents often have the inside scoop on which lenders work best for different types of buyers. They can give you several names to contact. And for some background information on each lender, and whether their clients have worked with them previously. They may be able to provide insights into the level of personalization or customer service each one provides
  • Use online comparison sites to shop multiple rates at once. This is a quick way to get several quotes — but make sure you screenshot or save a copy of your results. The lenders may be required to stick with the offers you get, so you want proof of what comes up
  • Apply with several different types of lenders. In addition to banks, consider applying with credit unions and digital lenders. This is especially helpful if you’re struggling to get approved or find a good rate. Alternative lenders, such as mortgage startups, may have more flexible loan programs to help you get approved with an affordable loan. They may also advertise no origination fees or other cost reductions that make them the most attractive option
  • Ask questions if you’re unclear about the offer details. When lenders make you an offer, they’ll give you a Loan Estimate document that lists your loan amount, interest rate, prorated property taxes, homeowners insurance, closing costs and other pertinent information. If anything seems off or unclear, speak up. You want to be certain you understand the details before making such an important decision

The earlier you act, the better

Sometimes life happens quickly, and you find your dream home unexpectedly. In that case, you may be looking at choosing a lender in a single day.

But in the best case scenario, you’ll get preapproved before you start looking at houses. That way, you know roughly how much you can afford.

Some real estate agents and sellers require you to be preapproved before they’ll show you a property, though you only need a letter from one lender at this stage.

However, you can apply for preapproval with several lenders to get an idea of their rates and start thinking about which company you feel most comfortable with.

Getting preapproved also takes some of the pressure off when it comes time to buy. You will already have organized your financial documents, and you’ll be familiar with the application process.

If your preapproval application is denied, you want that to happen early on. Then you can work on building your credit and reducing your debts to increase your chances of approval the next time you apply.

How do you know if you got the best mortgage rate?

Applying with three to five lenders will give you a sense of your options so you can be sure you’re choosing the best deal for you.

Another way to gauge your rate is to look at the average mortgage rates for that day in your market.

If you are applying with several lenders, make sure to do so on the same day to get your best points of comparison, as rates change daily.

Keep in mind, though, that the criteria used to determine the averages may not apply to you.

Rates are based on your credit profile, down payment amount, debt-to-income ratio, and other factors. So advertised rates simply provide a rough guide to see if your offers are way off base.

If you are applying with several lenders, make sure to do so on the same day to get your best points of comparison, as rates change daily.

Today’s mortgage and refinance rates

If you’re here, you probably already know that mortgage and refinance rates are at all-time lows.

This is a rare opportunity to lock in a historic rate before they rise again.

Just make sure you explore all your options, because the first rate you’re offered is hardly ever the best deal.

Luckily, online rate quotes and digital lending make is easy to find a low rate fast. So even if you’re in a hurry to lock, you still have time to shop.

Verify your new rate (Nov 25th, 2020)