Current mid-6% mortgage rates—with the 30-year fixed-rate mortgage averaging 6.48% this week—may be straining homebuying budgets, but lending experts say borrowers increasingly overlook one critical step that could help them get an even lower rate: shopping around for a mortgage.
Home buyers could save, on average, about $62,000 over the life of a 30-year fixed-rate mortgage—or $174 per month—just by gathering multiple quotes from lenders before they commit, according to a new study from LendingTree. Gathering at least three quotes from different lenders is preferred—but the more, the greater the savings.
The study found a 0.79-point rate spread between the lowest and highest average offers among lenders. For borrowers who received six or more offers from lenders, however, that spread increased to 0.98 points. While that may seem small, it can translate to about $174–$227 in monthly savings, the LendingTree study notes.
For financially sensitive buyers, that can add up. Buyers in certain high-cost states may see even greater savings by shopping around for a mortgage, like borrowers in Hawaii (who stand to save, on average, $89,621 over the life of a 30-year loan), New Jersey ($81,955) and California ($81,705).
“Shopping for a mortgage can feel intimidating, especially when rates are still relatively high, but this study shows how valuable it can be,” says Matt Schulz, LendingTree’s chief consumer finance analyst. “Even a small difference in interest rate can add up to tens of thousands of dollars over the life of a loan. That’s money people could instead put toward retirement, emergencies or simply making their monthly budget a little less stressful.”
How to Shop for a Mortgage
Because mortgage rates change daily, buyers are encouraged to shop among multiple lenders within a short window and compare not just interest rates, but APR (which includes fees), any discount points or rate-lock fees and closing costs. Also, gather quotes from a variety of sources—like traditional banks, credit unions, online lenders, mortgage brokers and community banks.
Also, many buyers don’t realize they can negotiate mortgage terms, just like you would for a car purchase. Borrowers can negotiate on interest rates as well as closing costs or lender fees.
For those who did, it can pay off. Consider, the LendingTree study found that almost all borrowers who negotiated their mortgage rate were able to snag lower monthly payments, including 37% who ended up saving more than $100 per month. Also, about a third of borrowers who negotiated closing cost or lender fees were able to reduce costs by $2,000 or more, while 12% said they saved more than $5,000.
Related: 6 Ways Your Buyers Can Save on Their Mortgage
