How to compare mortgage loan providers

Congrats! You’re buying your first home.

This also means that you need a mortgage. But because you’ve never worked with lenders before, you don’t know how to choose one to meet your particular needs and provide reliable services.

The moment you enter the market, you’ll notice that all financial providers, from banks to mortgage brokers and online lenders, are eager to take your application. If you have a good credit score, you decide which one you want to work with.

Researching before deciding can save you thousands. Your friends may have already recommended comparing mortgage rates before buying, but do you plan to do it?

The process can take long hours or even days, and you don’t want to waste your time because you lack knowledge in this domain, so you don’t fully understand the language. But a few hours of research can help you get a better deal. When you know what different providers offer, you can use the information to your advantage to negotiate the rates and interest.

Now that we convinced you to compare mortgage rates, you may wonder how to get it started. Here are some guidelines that should help you.

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How to compare mortgage rates

Your main priority should be to save money in the long run. So, when you browse for mortgage providers, organise the quotes by rate from the lowest to highest.

However, it’s essential to remember that rates aren’t the only factor to keep in mind. Most loan estimates also include other fees and costs; you should check before signing a contract with a lender. To do it analyse the estimate mortgage providers carefully send you when you ask for a quote. These documents include all the data you need to make an informed decision. The average estimate includes loan terms, quoted interest rate, monthly payments, closing costs, and fees. Lenders also include in their estimates a list of costs you cannot shop for to help you identify the prices you should compare when you browse for offers. The format of the documents is similar, so it’s easy to compare the rates from different lenders and identify the one that offers the best conditions.

Get from 2 to 5 quotes on the same day

Studies show that you can save even $300 a year if you compare at least three mortgage rates. But don’t think about it as a magic number. It’s best to compare four or more mortgage rates to ensure you get the best offer on the market. Each lender has different rates, and asking for a quote is free, so why not checking as many as possible? By investing time to research the offers mortgage providers have, you’re doing yourself a favour.

It’s best to get all quotes on the same day because mortgage quotes expire quickly. If you check the market, you notice rates are regularly changing, so the quote you got a week ago may be out of date. To make an informed decision, the data must be accurate.

Pay attention to unique discount points; they may not be what they seem

The mortgage market is vast and similar to any other industry, some companies are reliable, and others are not. Some lenders offer meagre mortgage rates but inflate closing costs, so you pay the same amount, only that you do it when closing. It’s a sneaky strategy, but some adopt it.

How can you identify a sneaky lender? It’s quite simple; you must check the points section on the loan estimate. You may also find it under the name of mortgage points or discount points. They allow you to get a lower mortgage rate through an upfront payment. And most lenders sell you this service.

To find the best deal, level the playing field by eliminating the discount points. If you find it challenging, call the mortgage provider and ask them to offer the rate without the discount points. It’s nothing wrong with these points, you may even prefer to pay more on closing, than for monthly rates, but it’s best to compare quotes described equally. If you compare online loans with discount points with ones that lack extra points, you basically compare apples with oranges.

Quotes can become leverage in negotiations

Asking multiple lenders for quotes offers more than information, it also gives you leverage. When you know what benefits each of them offers, you can play one mortgage provider off against another. It’s easy to do it. I like your company, but the other lender offers a lower rate or a less expensive closing fee. Can you match their offer? Can you provide a similar benefit?

Keep your hopes high but realistic because negotiations bring better offers, but don’t lower rates by much. However, when you need funds for a house, you borrow a considerable amount for an extended period (decades), so even a slight drop in a rate can save you hundreds if not thousands.

And even if you don’t manage to convince a lender to make you a better offer, you have nothing to lose.

Is there such a thing as too many quotes?

As we already mentioned, you’re borrowing money for decades, and you’re getting a huge loan, so there is no such thing as too many quotes. Browse the market, and ask quotes from as many lenders as you find comfortable until you think you have your information figured out. Besides, it’s easy to get a mortgage quote because all companies engage with their clients online. It’s your patience and button-clicking skills that limit the number of quotes you ask.

Aim to contact at least four mortgage providers, but if you can get in touch with more, the better.

Look not only for a reasonable rate but also for a good lender

You’ll have a long-term relationship with your mortgage provider, so it’s best to work with the best one. Yes, you must find the one that offers the best rates if you want to save money, but you can shortlist the options by considering only the reliable ones. You can pay slightly more to one that handles your inquires professionally, and offers high-quality customer support.