Signup to receive email updates




or follow our RSS feed

Blog Archives

519 Total Posts

follow our RSS feed

Blog Banner

Plan Well, Retire Well

Saving and investing your money
a-buy-me-a-coffee-987096 1920

Let's Shop for Mortgage Loans


Are you shopping for a new home to purchase? If so, are you spending enough time shopping for your mortgage loan too?

Shop around to find the best interest rate you can on loans. According to research from the Consumer Federal Protection Bureau (CFPB), many people think the rates at different financial institution are the same – but that's not necessarily true! Additionally, research indicates that failing to comparison shop for a mortgage costs the average homebuyer approximately $300 per year and many thousands of dollars over the life of the loan.

Even given the same loan amount, credit score, and other basic information, financial institutions often offer different loan interest rates. For example, today the Explore Interest Rate tool on the CFPB website shows that for someone with a credit score of 690, most lenders in Illinois are offering rates at or below 5.0% for a 30 year, fixed rate, $135,000 loan. However, if someone didn't shop around and just went to one lender to apply for a loan, they could be offered interest rates as low as 4.625% or as high as 5.875%!

Does a difference of 1.25% really matter? Yes! Even small variations in a 30-year interest rate can add up over time to big dollars. In the first 5 years, the higher rate would cost someone $8,402 more than the lower rate. Over 30 years, it would cost them more than $37,600. Shopping around can save you money.

I've heard people say they don't want to shop for a loan because they worry that it will hurt their credit score. We do need to keep our credit scores in mind when applying for loans. However, according to the CFPB, if you submit multiple mortgage applications within 1 - 45 days of each other, it will NOT affect your credit score.

What are good mortgage shopping strategies?

First, check your three main credit reports to make sure there aren't any errors and to see what steps you can take to raise your credit scores. You can receive each of your three reports free at www.annualcreditreport.com. If you'd like a paper form to submit, rather than collecting the reports online, you can download it or call your local Extension office.

Your reports at the different credit bureaus may be different, and any of the credit reports could have errors. Check your reports a few months before you plan to purchase a home so that you'll have time to make any necessary corrections.

Next talk to multiple lenders -- at least three is recommended. Make sure to compare the overall terms and fees for each loan to understand the true cost of each loan you're considering.

Ask each lender about other loan products they sell that might be right for you. You may qualify for several different loans, and the rates and fees on each product are likely to vary.

When you're ready to move forward with a home purchase, ask lenders to complete a Loan Estimate form so that you can make the best decision for you.

Throughout the home buying process, take the time to visit the Consumer Federal Protection Bureau's Owning a Home website for excellent resources such as a Roadmap to Help You Plan and the Loan Estimate Explainer.

I really like their interactive Explore Interest Rates tool, at, that allows you to input your state, loan amount, credit score and other variables to see what interest rate you're likely to pay and how that affects your monthly payments. The data on this page is updated twice a week. Even if you're not buying a home, it's very interesting to see how changing one variable affects monthly payments.

Buying a home is an exciting but challenging event! Take the time to do your research and shop around for the home AND the mortgage to keep your costs lower.



Please share this article with your friends!
Share on Facebook Tweet on Twitter Pin on Pinterest

COMMENTS



Email will not display publicly, it is used only for validating comment