Establish Your Finances

Why It’s Wise to Shop for Your Mortgage

Buying a home isn’t just a big decision, it’s a lot of big decisions, one after the other. Where do you want to live? What kind of home do you want? How much do you want to spend? When it comes time to choosing a mortgage, you may be worn out from making decisions and just go with the first option you find. But you can save money in the long run if you shop around for your mortgage and compare your options before you make your choice.

According to a study published by Freddie Mac, homeowners saved several thousand dollars over the life of their loan when they chose between several mortgage options. It’s recommended that you consider at least three mortgage rate quotes from different lenders.

Know What’s in Your Mortgage

Before you start mortgage shopping, first know what makes up your total monthly mortgage payment: a portion of the principal (the amount you are borrowing), interest (the cost to borrow that money), taxes, and homeowners’ insurance. Of those pieces, the part that will be most variable across different lenders and types of mortgages is the interest rate and the term (the duration of the mortgage). But there may also be differences in what is called “points,” which are fees you can pay to reduce the loan’s interest rate; other fees associated with the mortgage; the time it will take to close the mortgage: and how different lenders communicate and approach customer service.

Tips for Shopping Your Mortgage

Once you are ready to start shopping, keep these tips in mind:

• Visit different lenders of different types — credit unions, big banks, regional banks, online lenders, and mortgage brokers are all options. A good starting place can be the financial institution that you’ve already built a relationship with.
• Mortgage rates can change, so try to gather the quotes on the same day. Many financial institutions provide online quotes or can give you a quote on the phone.
• Make sure you know all of the fees associated with the quoted mortgage. Be especially careful with ads for mortgage rates that are particularly low — those might have hidden fees.
• Review your loan estimate carefully. This document should clearly outline all of the terms of your mortgage, including the interest rate and all associated costs, and your payment schedule.
• See if there is room to negotiate down any of the fees.
• Ask questions about anything about the mortgage or the lender’s practices that you don’t find clear.

Don’t let decision fatigue keep you from saving money. Ask around and compare details to find the best mortgage option for you.