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Principal Mortgage
Overview
Fixed Rate Mortgage
Short Term Loans
Adjustable Rate Mortgage
ARMs v. FRMs
FHA Mortgages
Home Affordability
Points
Down Payments
Settlement Costs
Why Shop
Mortgage Referrals
Payment Myopia
Lookout for Lies
Rate Locks
Floats and Float-Downs
Mortgage Qualifying
Mortgage Documentation
Avoiding Overcharges
Truth in Lending


Why It Pays To Shop

At any given time, people are out there looking to purchase a home and get a principal mortgage to finance this purchase. Choosing the right mortgage from the lender who offers the best terms is imperative.

Still, some people believe it isn’t worth it to shop and compare lenders when engaging in such a large purchase. They think that since rates are set by the market, there won’t be enough difference in lenders to justify their investment of time in shopping.

However, this is certainly not the case. Lenders vary greatly in the terms they require, and sometimes the variance may not be upfront and obvious. One of the ways to see this is comparing fees from different lenders, based on a loan with the same rate and term. For example, in 1998, when shopping for a 30-year loan at seven percent interest in Oregon, one shopper found a variety of fees with ten different lenders.

The fees were called different things – points, origination fees, processing fees, etc. However, in the end, the median fee was $5034. The lowest quote was $1700 below the median, and $3100 below the highest quote. This is a substantial savings in return for your investment of time in shopping.

The potential shopping savings only increases when the market is volatile. When rates are changing rapidly, different lenders have very different reactions. There is an increased chance that the rate quoted will be substantially lower with one lender than another at such a time.

If you are still concerned about the amount of time it will take to shop and getting the most out of the time you spend finding a good deal, you might think about shopping online. The Internet offers a way to get lots of quotes to compare without leaving the comfort of your own home, a surefire shopping strategy to save both time and money.

 

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