Shop Around
With a monthly mortgage bill in the hundreds of dollars, totaling thousands yearly, how much is it worth to you to save about $300 a year?
That’s the average of what borrowers might have saved by mortgage shopping, instead of taking a loan from the first [and last] lender one sees, according to an analysis of 130,241 conventional mortgages by economists Sergei Koulayev and Alexei Alexandrov.
Moreover, some consumers could have saved much more than $300 by hunting for the best fees and rate, according to the study, which is a Consumer Finance Protection Bureau Office of Research Working Paper.
Combined with emotion-laden home shopping, comparison mortgage shopping is a hassle, with consumers opting to “take the path of least resistance,” agrees Christopher Palmer, an MIT finance professor, who has also studied loan shopping.
Before they can get an accurate rate quote, a borrower has to supply lots of information – including savings and income history, debt obligations and down payment amount.
Some online sites aim to provide multiple quotes with one preliminary application.
Sam Michner of LendingTree, for example, says that if consumers complete forms including everything but the exact home they’ll buy, “the rates quoted are actual rates.”
But that’s assuming all the input remains correct when a borrower submits a formal application, which typically costs a few hundred dollars and incudes a home appraisal. Of course, if market rates rise in the interim, that impacts costs.
After securing preliminary quotes, suggests Palmer, check sites like bankrate.com and Zillow.com, which lists average regional costs.
Also, consumers may benefit from visiting local banks, says Ron Haynie of the Independent Community Bankers of America. Some banks are trying to attract local mortgage business, and are very rate competitive, he says.
Discounts on stated costs are also often available, “if you have another deposit relationship or you get your mortgage payment automatically deducted,” Haynie adds.
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