Shopping for a mortgage

Why Shopping Around for your Mortgage Makes a Huge Difference Shopping around for a mortgage?

 

Sometimes it can be daunting because of all the application paperwork. So, that begs the question: Who would want to go through the process multiple times? The fact is, if you don’t shop around for your mortgage you’re doing yourself a huge disservice. Here, Forbes lays out the benefits of being a discerning consumer.

 

Rates are always changing

 

You’ve probably heard that interest rates are rising, but you also may have heard that rates still are at historic lows. While both of these statements are true, if it seems like the news of mortgage interest rates is constantly changing, that’s because it is. Mortgage interest rates change daily depending on the strength of the economy. In strong economies, where people are more likely to buy a home, it costs both you and the bank more to borrow money. In weaker economies, rates dive lower to provide an incentive for people to borrow. When you buy, your aim should be to borrow at the lowest possible interest rate to save money during the life of your loan. Shopping around for a mortgage will give you a chance to keep an eye out for the best rates, as they fluctuate daily.

Interest rates add up

 

\Although mortgage interest rates have a tendency to fluctuate, they rarely go up or down by more than a fraction of a percentage point. Unfortunately, that small of a movement leads many buyers—especially first-timers—to get complacent because they’re unaware of how much of a difference just a fraction of a percentage point can make. The reality is, a difference of half a point (or even less) can add up to thousands of extra dollars spent during the term of the loan. For example, if you bought a $200,000 house and put 20 percent down on a 30-year loan, with an interest rate of 3.5 percent your monthly payment would be about $719 dollars. However, if that interest rate was to jump to 4.5 percent, your new payment would be around $810. A difference of $100 a month may not seem to make that big of an impact on your monthly budget, but those numbers add up over the long term. For a one-point difference, you’ll end up paying more than $35,000 in added interest during the course of the 30-year loan.

 

It won’t impact your credit

 

Buyers often are hesitant to shop around for a mortgage rate because they worry it will negatively impact their credit. While this used to be true, fortunately, it no longer is the case. These days, the major credit bureaus have agreed to treat all mortgage inquiries as one, as long as all of the inquiries occur within the same period of time. The catch: an acceptable period of time varies. It lasts between 30-45 days, depending on the credit bureau. With that in mind, while you can shop around as much as you’d like during that time, it’s best to stick closer to the 30-day mark so that you know you’re covered.

 

Interest Rate Rise

Everyone’s fees are different

 

Most loans come with origination fees and points. Origination fees are used to cover the costs associated with closing the loan, including compensating the loan officer, while points are an additional fee that you can pay to the mortgage company in exchange for a lower interest rate. As with any other industry, each lender will have their own fee structure. Points often are optional, and in some cases, you can negotiate with the lender to have certain fees waived or discounted. Shopping around for a mortgage will allow you to find the fee structure that works best for you and your wallet.