New Mortgage: How Much Can Shopping Really Save You?
By: Freeman Liz
March 10, 2010
Why shop for a mortgage online? Mortgage interest rates differ between lenders more than you might think. Some lenders are more efficient than others and can afford to make less on individual deals, others are willing to offer special low rates to attract borrowers with better profiles (higher credit scores rate float-downand more equity), and still others may balance their portfolios by offering below market rates to those in certain geographic areas or with certain profiles.?? Limiting exposure in a single area or category of loan amount or mortgage type helps lenders avoid risk; they are willing to pay for that in the form of lower interest rates. Some lenders may not discount mortgage interest rates, but they do add valuable freebies like interest rate float downs, which allow you to lock in the best mortgage rate you can get because if rates drop when you close on your loan, you get the benefit of the lower rate. The bottom line? You don't know what the best mortgage rate available is unless you do some checking.
Shopping online offers advantages you might not have thought about. First, you can't really compare lenders' offers if you get them piecemeal, some of them on one day, others the next -- because mortgage rates can change in a matter of hours. Comparing a quote from Monday with one on Wednesday isn't meaningful. Shopping online means that you can contact many lenders at once and get quotes from the same day.
In addition, shopping online protects your privacy. Worried about discrimination? Mortgage lending has come a long way,?? and overt, deliberate discrimination is almost entirely a thing of the past.?? Today, discrimination is more likely to be unintentional, according to the Federal Reserve. But unintentional or not, if you can avoid it, why not do so? The fact that you are shopping online gives lenders a heads-up, letting them know that you are no pushover and are shopping around. And they have no idea who you are.
Want good information? Be prepared to provide information. The best and most reliable mortgage quotes come with Good Faith Estimates, which are legal commitments by the lender to honor the rate and fees disclosed.?? Worksheets or scenarios don't come with the same guarantee, so a GFE is better. But lenders can't provide one without a lot more information from you -- your credit scores (or SS number so yor scores can be obtained), the property address, its value or sales price, your down payment or equity (if refinancing, you'll need the payoff on your current loan), the purpose of the loan (cash out refi, purchase, rate and term refi), and the property use (primary residence, rental, vacation home). If you are able to provide all this information, the lender should be willing to furnish a GFE -- no excuses.
What difference does it make? A lot.?? Paying 5.25% instead of 5% on a $300,00 mortgage means paying $47?? more per month, and?? $17,123?? more over the life of the loan -- probably worth a few hours of shopping when you get your next refinance.
