Shopping for a Mortgage Loan

Why should you shop around?

It’s as simple as this: spending a little bit of time researching the interest rates offered by various lenders can save you tons of money. A mortgage is probably the biggest debt you will ever assume, so its interest rate can dramatically affect how much you pay in sum. For example, a difference of just 0.5% can cost you or save you tens of thousands of dollars over the lifetime of your loan. Having an excellent credit score and a lot of money saved for your down payment certainly help get you lower interest rates, but it’s recommended that you thoroughly shop all your options in order to get the best deal.

shopping for a mortgage loan

Here are three ways to shop for a mortgage lender:

Search online

Look for sites that display rates up front or provide an aggregate based on your loan type and amount. Be wary of sites that want your contact info before showing the rates you qualify for, unless you enjoy a constant barrage of phone calls and emails!

Ask your local bank or credit union

If you already have a good relationship with them, it may be worth it to get the personalized attention that these financial institutions offer. After all, it’s much easier dealing with a single point of contact if you have questions. If you already have an account, you should be able to walk in or make an appointment with a loan officer. They’ll likely have you fill out a loan application, but you are not obligated to accept it, so it’s worth checking out just to see what rates you will get.

Use a mortgage broker

If you’re having trouble getting approved by banks for a loan, you can hire a mortgage broker to shop your loan to many different lenders. They’ll work on your behalf to find and complete the transaction for you, though they are not under any obligation to get you the best deal possible. The mortgage broker gets a commission from the lender or a fee from the markup of your loan in exchange for helping you find the best interest rates among dozens of local lenders.

comparing different mortgage lenders

The next steps

Once you’ve found a good interest rate, make sure you take a look at the lender’s fees. Sometimes the lowest advertised rate isn’t actually the cheapest because various fees are tacked onto the loan. It can include loan origination fees, underwriting fees, broker fees, settlement fees, prepayment penalties and more, so don’t forget to read the fine print!

Finally, once you’ve found the best deal for you, it’s time to get preapproved by your lender of choice. Don’t procrastinate once you’re preapproved -- you may have a “lock period” for the rate you’ll receive, meaning that if you don’t close on a home within a certain amount of time, the rate will expire.

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Are you a real estate professional? Go here.

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Ready To Become A Smarter Homebuyer?

By signing up, you agree to Nestiny terms of use.
Are you a real estate professional? Go here.