Unfortunately, nearly half of all Americans do not actively shop around for the lowest mortgage rates. Most Americans who wish to buy a new home or refinance an existing mortgage apply with the first broker or lender they find, according to ConsumerFinance.gov.
According to data provided by the Consumer Financial Protection Bureau, mortgage shoppers will save ½ percent on their mortgage interest rates if they apply with multiple lenders or brokers. The typical borrower saves an average of $60 per month in mortgage payments by applying with more than one bank. The total average savings equals $760 per year, and homeowners can use those savings to upgrade their home or pay for unexpected repairs.
Avoiding the “Lender of Last Resort”
The concept of the “lender of last resort” refers to mortgage shoppers who believe their credit, income or assets are not sufficient enough to qualify for low-interest rates. Therefore, they accept an offer from any bank that approves their application. Countless mortgage shoppers fall into this way of thinking not realizing that mortgage lenders offer dozens of loan programs for consumers with less than stellar credit or limited income and assets.
Every mortgage lender in the United States offers loan programs with flexible terms, low rates, affordable down payments and reduced closing costs. The trick to finding the right programs is obtaining multiple quotes from multiple lenders, and comparing the loan programs to each other. Unfortunately, most consumers don’t want to spend time comparing programs, but the additional time it takes to compare programs and their interest rates save money in the long run.
Relying on Third-Party Brokers for Mortgage Interest Rate Information
According to the CFPB, nearly 70 percent of all mortgage shoppers obtain their information directly from brokers or lenders. This statistic poses a big problem for people who need to lock in lower rates. Mortgage lenders and brokers provide their information with an angle; they want to sell products and services. Therefore, they constantly remind shoppers about their low-interest rates and affordable terms and limit the amount of quality information customers can use to find low mortgage interest rates from other sources. Not all lenders and brokers offer poor information, but they do limit the amount of quality information mortgage shoppers can use and present that information to other lenders.
The best way to find quality information regarding low-interest rates is through reputable websites and well-known banks. ConsumerFinance.org, Bankrate.com, and Investopedia.com are reputable, neutral websites offering quality information mortgage shoppers can use to find the lowest mortgage interest rates possible.
Quick Guide to Low Mortgage Interest Rates
Qualifying for a low-interest mortgage is not as difficult as it appears. Many mortgage shoppers can save 1 percent or more by using some simple strategies that are proven to work.
• Keep mortgage shopping local. Typically, consumers save the most money by visiting their local bank branch and talking with a mortgage loan representative. The banks usually quote the lowest market rates and detail the type of loan programs they offer that save the most money.
• Mortgage shoppers should check their credit scores before they apply with any lenders. Transunion, Experian and Equifax are the three credit reporting agencies in the U.S. They provide accurate residential merged credit reports, which are the reports all lenders use to check customers credit scores.
• Good credit scores typically assure low-interest rates. Banks consider any score above 720 a good score, and mortgage shoppers with scores above 720 will receive the lowest quotes.
• Mortgage interest rates fluctuate by the second. Banks do not dictate interest rates, markets dictate interest rates. Therefore, mortgage shoppers should not rely on one rate from one bank. That rate will change the second it is quoted. Again, mortgage shoppers should obtain multiple quotes from several banks, and present the lowest quote to the banks with the highest quote, and the banks will compete with each other, which lowers mortgage rates across the board.