Tips For Shopping For A Lender

6 Tips for Shopping for a Lender

Introduction

Choosing the right mortgage lender is a crucial step in the homebuying process. Different lenders offer varying interest rates, fees, and loan terms, which can significantly impact the total cost of your mortgage.

By shopping around and comparing multiple lenders, you can potentially save thousands of dollars over the life of your loan. This guide provides six key tips to help you navigate the process and secure the best mortgage for your needs.

Key Concepts

Why Shopping for a Lender Matters

🔹 Mortgage costs vary—Different lenders offer different interest rates and fees.
🔹 More options = More savings—Getting multiple quotes can save $1,500 to $3,000 on average.
🔹 Understanding loan terms is essential to making an informed decision.

Types of Mortgages to Consider

Before comparing lenders, decide which type of mortgage fits your financial situation:

Mortgage Type	Description	Best For
Fixed-Rate Mortgage	Interest rate stays the same for the loan term	Buyers wanting predictable payments
Adjustable-Rate Mortgage (ARM)	Interest rate fluctuates after an initial fixed period	Buyers who plan to move or refinance within a few years

💡 Tip: Choose a mortgage that aligns with your financial goals and long-term plans.

Data Insights: Why Comparing Lenders is Essential

📊 Nearly half of homebuyers do not shop around before committing to a lender.

📉 Research shows that:
✔ Getting one additional quote could save an average of $1,500 over the life of the loan.
✔ Getting five additional quotes could save around $3,000.

By exploring multiple lenders, you can secure better terms and reduce your total mortgage cost.

6 Essential Tips for Shopping for a Lender

1. Get Quotes from Multiple Lenders

✔ Visit at least three to five lenders to compare loan options.
✔ Look at both interest rates and fees—not just the lowest rate.

2. Consider Different Types of Lenders

✔ Compare offers from banks, credit unions, mortgage brokers, and non-bank lenders.
✔ Each type of lender may offer unique programs or lower fees.

3. Compare Loans on the Same Day

✔ Mortgage rates change daily, so request all quotes on the same day for accurate comparisons.
✔ Use a loan comparison calculator to analyze your options.

4. Shop Within a 45-Day Window

✔ Multiple credit inquiries within 45 days count as one inquiry for credit scoring purposes.
✔ Spreading out applications beyond 45 days could lower your credit score.

5. Compare All Loan Terms, Not Just the Interest Rate

✔ Consider:

APR (Annual Percentage Rate) – Includes both the interest rate and lender fees.
Loan term – A 15-year loan has higher payments but less interest than a 30-year loan.
Origination fees, closing costs, and lender application fees.
✔ Request an itemized summary of estimated fees from each lender.

📖 After applying, lenders must provide a Loan Estimate, which details all costs and terms.

6. Ask Questions About Loan Features

✔ Ensure you fully understand loan terms, fees, and repayment details.
✔ If unsure, seek help from a HUD-certified housing counselor for guidance.

Common Misconceptions About Shopping for Lenders

❌ “The first offer I receive is the best one.”
✅ Interest rates and fees vary, so shopping around is essential.

❌ “A lower interest rate always means a better loan.”
✅ Other fees, like origination and closing costs, affect your total loan cost.

❌ “Getting multiple loan quotes will hurt my credit score.”
✅ Credit scoring models treat multiple mortgage inquiries within 45 days as one inquiry.

Practical Applications: Making the Right Choice

✅ Compare at least three lenders before choosing one.
✅ Use a mortgage calculator to analyze different loan scenarios.
✅ Read the fine print and understand fees before signing.
✅ Ask your lender questions—don’t accept a loan you don’t fully understand.

By following these tips, you can secure the best mortgage terms and potentially save thousands of dollars on your home loan.

📖 Next Steps: Learn more about how to avoid predatory lending and identify trustworthy lenders.

6 Tips to Consider When Shopping for a Lender

Different lenders will offer different terms and charge different fees for a home loan, whether you’re buying or refinancing. That’s why it’s important to get quotes from more than one lender, compare your options and ask questions. The more you shop around, the more information you’ll gain — and the more money you could save.

Shopping around for a mortgage could save you hundreds or thousands of dollars. Our research showed that getting just one additional rate quote could save homebuyers an average of $1,500 over the life of the loan, and getting five more quotes saved an average of about $3,000.

Although it can be tempting to accept your first offer, it pays to research your mortgage options.

Decide What Type of Mortgage Is Right for You

Before you start reaching out to lenders, you’ll first want to determine which type of mortgage is best for you. There are two main types of mortgages:

Each has its own set of features and benefits that you should carefully consider.

Once you’ve decided which mortgage product best fits your financial situation and goals, it’s time to shop, compare and ask questions.

Home Loan Shopping Tips

Here are six tips to keep in mind when shopping for a lender.

Tip 1: Get quotes from multiple lenders

It’s recommended that you visit three to five lenders and discuss your mortgage options.

Tip 2: Consider all types of lenders

Obtain estimates from loan officers at banks and credit unions, as well as mortgage brokers and non-bank lenders.

Tip 3: Compare loans on the same day

Because mortgage rates change frequently, it’s best to compare loan programs on the same day so that you can accurately judge cost estimates from several lenders.

Tip 4: Shop for a loan within a 45-day period

Try to do your mortgage shopping within a 45-day period so that there’s minimal effect on your credit. Multiple credit inquiries outside a 45-day period could lower your credit score.

Tip 5: Compare all loan terms, not only the mortgage rate

The loan with the lowest mortgage rate may not always be the best choice for you. Rates are important, but you should also consider the overall cost of the loan.

Be sure to look at the mortgage term, which is the duration of the mortgage, and the associated costs of financing, such as:

The APR for the loan.
Lender application fees.
Processing or loan origination fees.
Closing costs (also known as settlement fees).

For each lender you work with, ask for an itemized summary of estimated fees. This should help you understand costs and compare mortgage options.

After you’ve submitted an application, the lender is required to provide you with a loan estimate that includes the terms of your loan and all estimated costs, plus your APR, finance charges and payment schedule.

Tip 6: Ask questions if you don’t understand loan features

Ask the lender to fully explain the loan program that is being offered to you if you don’t understand all its features.

To help you weigh the pros and cons of your mortgage options, consider working with a housing counseling agency. A HUD-certified housing counselor can be an objective advisor and guide you in considering lenders and mortgage options.