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Few folks would buy a home after looking at just one. Money Talks News founder Stacy Johnson says home shoppers who look at only three homes are nitwits.
Yet plenty of homebuyers sign on the dotted line after contacting only one mortgage lender or getting only one quote, according to a U.S. Consumer Financial Protection Bureau mortgage shopping study released earlier this year.
Shopping around — or lack thereof
The main goal of the study was to examine the effect of mortgage comparison shopping. Thousands of consumers in the U.S. who went through the homebuying process in 2016 were surveyed for the study, with polling conducted throughout the homebuying process.
Mortgage shopping was gauged by the number of:
- Lenders that participants contacted
- Preapproval letters that participants obtained
- Loan estimates that participants received
Some 4,100 study participants ended up buying a home. These homebuyers reported that on average, they:
- Contacted 2.04 lenders
- Obtained 1.96 preapproval letters
- Received 1.37 loan estimates
Because these numbers are averages, it means plenty of the homebuyers did not shop around for mortgage lenders or estimates.
An expensive mistake
Part of the reason for this may be that only 15 percent of folks know that submitting multiple mortgage applications in the same week does not hurt the applicant’s credit score, as the CFPB’s study found.
But whatever the reasons for it, failing to shop around for a mortgage can cost you big.
Prior CFPB research found that the difference between the average person’s actual mortgage interest rate and the lowest rate available to them amounts to $300 per year — or $9,000 over the life of a 30-year mortgage. In other words, not shopping around costs the average person $9,000 in extra interest payments.
What it means for you
If you are in the market for a home or will be in the future, learn this cautionary tale before it’s too late.
The Federal Reserve continues to raise its benchmark funds rate, which contributes to higher mortgage interest rates over time. So, failing to shop around for a mortgage in coming years could cost you even more than $9,000.
One way to start mortgage shopping — or simply get an idea of what interest rates you could qualify for — is to use Money Talks News’ mortgage comparison tool.
For further guidance, check out “How to Buy a House: Getting the Best Deal on a Mortgage.”
If you already have a mortgage for which you didn’t shop around, it’s not necessarily too late to correct course.
The MTN mortgage comparison tool can help you learn what kind of interest rate you can get if you refinance your mortgage. From there, you could determine whether refinancing is worth it.
If you have a fixed-rate mortgage, refinancing may not be worthwhile now that interest rates are inching upward. But if you have an adjustable-rate mortgage, you may save on interest by refinancing to a fixed-rate mortgage, thereby locking in an interest rate before rates climb higher.
How do you feel about mortgage shopping? Share your thoughts below or on Facebook.