A mortgage will arguably be the biggest financial decision of your life. So a homeowner has every right to shop around a bit, and look for the best deal. However, there are drawbacks to doing so. In this article, we’ll discuss the pros and cons of talking to multiple lenders, and when to pull the trigger.
What are the benefits of getting mortgage quotes from multiple lenders?
It’s hard to know if you’re getting the best deal without comparing the deal with other offers. And because laws are limiting how much mortgage companies are compensated, there are less rates and fees associated then there was in the past. However, the differences still remain subtle. What might look like big savings now, could amount to much larger sums of money with long mortgages. Nonetheless, each lender structures loans differently in regards to rates and closing costs. Some lenders will even up the closing costs to decrease your interest rate, while others might advertise low or no closing costs at all, in exchange for high interest rates. Because there are numerous ways lenders can present quotes to you, it’s important to put them side by side and weigh your options. While it’s generally a good idea to pay higher closing costs for a lower interest rate, the money you save on your interest rate could eventually surpass the closing costs.
What are the disadvantages of getting mortgage quotes from multiple lenders?
In order for a lender to approve your mortgage application and extend an offer, they have to review your credit report by inquiring with the three major bureaus. Many homebuyers don’t know this, but inquiring with too many lenders can actually lower your credit score. Credit bureaus can also make money by selling your information to mortgage lenders — and more importantly, lenders you didn’t even apply to. This creates what’s called a trigger lead. And when you submit a mortgage application, it triggers a credit pull, so a mortgage company can pay the credit bureau for a list of people whose credit was pulled by mortgage companies. You could end up receiving numerous phone calls, with mortgage lenders wanting to make their pitch. So if you want to avoid spam calls, be cautious of how many quotes you go looking for.
Is there a sweet spot of mortgage quotes I should obtain?
While we wish we could give you a number, there isn’t a sweet spot on the amount of mortgage quotes you should get. It’s a catch 22 — you don’t want to miss out on a good deal, but going after too many could hurt your credit score. The best approach in this situation is to start doing market research. Get an idea of what makes up a “great deal” in the current market, and then contact two to three lenders and allow them to challenge or match the numbers you’ve established. This will at least give you a baseline, so you can get a better idea if the lender is able to meet your expectations or not.
If you’re looking for a mortgage lender in Maryland, Ken Venick is your guy! With over 30 years in the mortgage business, he can put you or your client in the right place to lock in the home of your dreams. Contact us today!