Learn How Shopping for Lenders Can Save You Thousands Over Your Mortgage

Unlocking Savings in Your Mortgage Journey

In today's fluctuating housing market, the importance of thoroughly shopping around for lenders can't be overstated. A recent analysis by Realtor.com® reveals that the choices borrowers make can drastically affect their mortgage costs—potentially saving them thousands over the course of a 30-year loan.

Understanding the Impact of Mortgage Rates

Mortgage rates are often influenced by broader economic factors, yet individual borrower profiles significantly impact what rates are available to them. In the third quarter of 2024, when average mortgage rates hovered around 6.60%, borrowers with stronger credit profiles managed to secure rates as low as 6.25%. This disparity highlights that improving your credit score or making a larger down payment can tilt the scales in your favor. For instance, on a median-priced $425,000 home, those obtaining the lower rate could save over $60,000 across the life of the mortgage compared to those with higher rates.

Borrower Decisions Matter

Danielle Hale, the chief economist at Realtor.com®, emphasizes that even small rate improvements can make homeownership more accessible to many buyers. Decisions around credit scores, down payments, and lender comparisons can lead to significant financial outcomes. Depending on their financial profile, borrowers might find themselves paying between $300 and $3,300 more yearly in interest than their counterparts with better credit standings or larger down payments.

Jake Krimmel, a senior economist at Realtor.com®, further elaborates that achieving certain financial thresholds is more beneficial than attaining perfection. Jumping from a 'good' credit score to 'very good' could provide a discount of approximately 0.11 percentage points on the interest rate, translating to additional savings.

The Power of Lender Choice

The analysis found that shopping around could lead to substantial savings for borrowers; lender selection is the leading factor in potential rate reductions. Rates differed by up to 0.55 percentage points between the most and least expensive lenders—an amount that can surpass the benefits gained from merely improving one’s credit score or down payment. For example, a borrower opting for a 6.05% rate instead of a 6.6% rate on a $425,000 mortgage could save about $122 monthly. Over 30 years, this savings accumulates to nearly $44,000—a figure too significant to ignore.

Key Milestones for Savings

When it comes to down payments, crossing the 20% threshold yielded rewards that dwarf those from smaller increases. Increasing a down payment from 10% to 20% not only reduces the loan size but can also improve interest rates, leading to substantial savings—averaging around $3,372 per year and over $101,355 over the entire loan period.

Nonetheless, doubling a down payment could be an intimidating prospect for many, especially first-time buyers. Therefore, understanding other levers such as credit improvement and lender comparisons remains crucial for maintaining affordability in today’s market.

Closing Insights

Additionally, it’s important to note that buyers of second homes or investment properties typically pay about 0.5 percentage points more than they would for a primary residence, indicating that property type and use can also shape mortgage costs. As Krimmel states, even in this challenging market, strategic buying—by honing in on financial aspects within your control—can provide a more favorable purchasing environment.

In summary, for those looking to navigate the complexities of securing a mortgage, the takeaway is clear: do your homework. Compare lenders, sharpen your borrowing profile, and seize every opportunity for potential savings. By optimizing these factors, you can make a measurable difference in mortgage affordability for yourself.

Methodology

The analysis was predicated on nearly 2 million mortgage originations analyzed between 2023 and 2024, employing statistical methods to trace influences on mortgage rates based on borrower qualifications. This research underscores the significant power of consumer choices in shaping financial outcomes.

About Realtor.com®

As a pioneer in online real estate, Realtor.com® has built a robust reputation for connecting users with reliable insights and resources to facilitate their property journeys. Recognized for its commitment to guiding buyers and sellers effectively, it operates under the umbrella of News Corp. For more detailed support and to explore various real estate tools, visit Realtor.com® today.