It is always in a home buyer's best interest to shop around for a mortgage. This is because like most other industries mortgage lenders compete against each other for customers which leads to competition and can yield significant savings by having lower interest rates or shaving points which can save money for the home buyer. Also, certain mortgage lenders may specialize in less traditional types of mortgages which could open up the available options which may be limited if you go to your local bank or credit union.
When shopping for a mortgage there are three primary aspects you'll want to take into account. These factors can determine the overall cost of the loan taken and can lead to significant savings if properly negotiated. The main factors include the interest rate, the amount of points and various fees that are associated with the total closing costs. All of these are negotiable and if you go in well informed and ready to haggle could lead to thousands of dollars in savings.
When looking for a mortgage, the best case scenario would be to have a low interest rate for a 15 or 30 year term in addition to 1 point or less and minimal closing fees. But how do you know whether or not you're getting a good deal? It's actually quite simple; get the paperwork started at multiple lenders. Ideally one or two national banks and a local bank or credit union because all of these organizations will have to provide estimates on what the fees will be to obtain a mortgage. Right away you will be able to determine whether or not certain fees are exaggerated. If Lender A has a 4% interest rate with 1 point and a total closing costs of $3,000 while Lender B has a 4.5% interest rate with 1.5 points in the closing cost of $4,000 then you know right away that Lender B might have inflated costs. Getting multiple quotes from various mortgage lenders is your best safeguard against paying too much on a new mortgage.
However, it may not always be so cut and dry. Some lenders may have lower interest rates but charge more points and other lenders may have lower interest rates and lower points but have significantly higher total closing costs. It might be worthwhile, especially if you're starting a family and will be in the home for 20 to 30 years, to pay more points and closing costs up front to get a substantially reduced interest rate because the long-term interest savings could be in the tens of thousands of dollars.
Just like shopping for a new automobile, let the individuals you are dealing with know that you're speaking with multiple mortgage lenders at the same time. It might be worth while to even provide them some specifics on what is been offered as this may be the best way to gain an advantage in negotiations for better prices. All of these financial organizations know the game and are competing for the same customers so use this to your advantage to get the best interest rates and lowest closing costs. Knowing this, if anyone asks you if it's best to shop around for a mortgage the answer will always be a resounding yes.