I know, I know, mortgage shopping is the worst. It’s not a fun thing to do.
It’s not like shopping for a new car or a new TV, or even a new house. But it’s a necessary evil unless you’ve got a boatload of cash.
The reason it’s not fun is because there’s lot of math, paperwork, and high-pressure salespeople involved.
Not to mention lots of mortgage lingo that will likely go over your head.
But there’s a silver lining to putting in all that time to shop; you’ll learn a lot about mortgages.
I Get It, Mortgages Aren’t Fun
Look, I’ll be the first person to tell you that mortgages are boring af. I’ve been writing about them for nearly 20 years now.
And before that, I was working on the frontlines with mortgage brokers and loan processors and underwriters.
None of it was fun, and it’s probably even less fun when you’re new to it and simply trying to get through it.
Conversely, you might have a blast shopping for a new car and doing test drives while checking out all the cool features.
The same goes for new clothes, a new TV, computer, etc. They call it retail therapy for a reason.
I’ve never heard anyone say mortgage shopping is therapeutic. In fact, it’s usually the exact opposite.
Typically, people say they’d rather go to the dentist than go through the mortgage process.
Okay, so what’s the point here? Well, as mentioned, you can learn a lot if you do shop around.
Learn About Mortgages as You Shop Your Rate
Most people don’t shop around for their home loan. They either just go with the lender their real estate recommended, or the first quote they come across.
Again, this is because mortgages are not at all fun. And not getting any funner.
Not only does this cost people (since studies prove multiple quotes leads to lower rates), it also means you won’t learn a whole lot.
Again, I understand. Most people are literally just trying to get through it so they can move into their new home. Or enjoy a new low rate on their existing mortgage in the case of a refinance.
But aside from potentially paying more, you’ll also learn less. And when you know less about something, the probability of a bad decision increases.
For example, you might pick the wrong mortgage product for your individual situation.
Or you might be told to pay discount points at closing, only to sell your home or refinance before the breakeven period.
You might even refinance even when it doesn’t make sense to do so. Or buy too much house and become house poor because the numbers were only presented to you one way.
Bringing it full circle, you might also get ripped off because you’ll be a novice and more easily taken advantage of.
If you actually make a few phone calls and speak to multiple loan officers, mortgage brokers, etc., you’ll learn more about the ins and outs of it all.
Each time you talk to someone new you’ll have a little bit more knowledge than the prior call.
And this will help you avoid the typical gotchas and perhaps allow you to come off more confident. That can lead to better mortgage rate negotiating and ultimately better odds of a lower rate.
Here Are Some Mortgage Shopping Tips to Make It Less Awful
If you’re stressed about it your credit scores, keep in mind that while mortgage inquiries can lower your credit score, it’s often not by much.
You also don’t need to let everyone run your credit. And FICO now combines multiple mortgage inquiries into one when made within a 14- to 45-day window.
Those who have heard of those annoying trigger leads can employ a strategy I laid out years ago.
Use a temporary phone number like Google Voice for free. Share that number with all the lenders, brokers, etc.
Then ditch it once you’ve found your match and carry on with your real number. Or just keep using the temporary one!
Even if you use a mortgage broker, take the time to compare mortgage brokers too. Because many of them just send all their business to one lender. So it’s not really shopping around.
In addition, they have varying compensation structures, meaning if you compare more than one you might land on the broker who earns less per loan and saves you money.
For example, one broker might earn 2% on each loan, while another is satisfied with just 1% loan origination fee in exchange for more volume. The broker earning less will likely have the lower rate and closing costs.
Lastly, if you already have average or poor credit, know that mortgage rates can vary even more, so shopping around is even more important!
Simply put, rates are priced in a tighter range for those with really high FICO scores. But even those folks should also gather more than one quote!
Read on: How to shop for a mortgage.
(photo: Alan Levine)
