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Why Shop for a Mortgage?

Tuesday, 05 Aug 2014 03:15 PM

 Shopping for a new car, outfit or home is usually fun. Shopping for a mortgage? Not so much – which is probably why recent surveys show that only about half of homebuyers compare quotes from several competing lenders before choosing their home loans. However, folks who do comparison shop for their mortgages save enough that they actually can afford to spend more time pillaging the mall – or even shopping for a new car!

Researchers at Stanford University concluded in 2012 that the reason so many consumers don’t shop around for their home loans must be that they don’t realize just how much money they are leaving on the table -- it’s a lot!

How Much Do Mortgage Rates Vary Between Lenders?

You might think that there isn’t a lot of variation from one lender to another – after all, most get their money from the same sources, so costs should be the same, right? Wrong! Some lenders are more efficient than others, and lenders constantly adjust their prices to control the amount of business coming in – there is a limit to the number of loans that can be processed.

Don’t pay too much for your mortgage! Compare rates now.

One company, Mortgage Industry Advisory Corporation (MIAC), found that mortgage interest rates consistently vary by .25 percent to .50 percent (depending on the loan size) between lenders on any given day. That’s huge – the difference between paying 5.00 percent and 5.25 percent on a $300,000 loan is over $16,000, and a .50 percent difference is over $32,000 – enough for a new car!

Data from LendingTree in 2014 uncovered a .365 percent difference on average between mortgage offers on 30-year fixed mortgages from competing lenders. With an average loan amount of $223,692 for prime borrowers seeking these loans, that variance translates to a payment difference of $47.49 per month, $575.64 per year or $17,269 over the life of the loan.

How Much Can You Save On Closing Costs?

In their 2012 study, Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory and Mortgage-Market Evidence, Stanford University researchers Susan E. Woodward and Robert E. Hall found that borrowers with $200,000 loans who obtained at least four quotes from competing lenders saved a median $2,664 over those who got just one or two quotes. That could buy you a pretty nice vacation.

Get custom quotes from mortgage lenders in minutes.

It only takes a few minutes to get several quotes from competing mortgage lenders online. With that much money in play, most people can’t afford not to shop around for their home loans.

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Shopping for a new car, outfit or home is usually fun. Shopping for a mortgage? Not so much - which is probably why recent surveys show that only about half of homebuyers compare quotes from several competing lenders before choosing their home loans. However, folks who do...
lendingtree, why, shop, mortgage
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2014-15-05
Tuesday, 05 Aug 2014 03:15 PM
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