Shopping for a mortgage saves the average borrower $1,500 per year—that’s $45,000 over a 30-year loan. Get quotes from at least 3-5 lenders within a 14-day window (all inquiries count as one credit pull). Compare the Annual Percentage Rate (APR), not just the interest rate, since APR includes fees. The lowest rate isn’t always the best deal if closing costs are significantly higher.
Why Mortgage Shopping Matters
The Cost of Not Shopping
Most borrowers accept the first rate offered. This is a mistake.
Rate variation between lenders:
- Same day, same borrower profile
- Rate quotes can vary by 0.5% or more
- On a $350,000 loan, 0.5% = $100/month = $36,000 over 30 years
What Shopping Reveals
Rate differences: Lenders price differently based on their appetite for your loan type
Fee differences: Origination fees, points and closing costs vary dramatically
Service differences: Communication, technology and processing speed differ
Program differences: Some lenders offer products others don’t
Types of Mortgage Lenders
Banks
Examples: Chase, Wells Fargo, Bank of America
Pros:
- Existing relationship may help
- Branch access for questions
- May offer rate discounts to customers
Cons:
- Often not the most competitive rates
- Less flexible underwriting
- Larger bureaucracy
Credit Unions
Examples: Navy Federal, PenFed, local credit unions
Pros:
- Often lower rates than banks
- Lower fees
- Member-focused service
Cons:
- Membership requirements
- May have limited loan products
- Smaller staff, potentially slower
Mortgage Brokers
What they do: Shop multiple lenders on your behalf
Pros:
- Access to many lenders at once
- Can find niche products
- One application, multiple quotes
Cons:
- May steer toward higher-commission products
- Not all lenders work with brokers
- Broker fee added to costs
Online Lenders
Examples: Rocket Mortgage, Better, LoanDepot
Pros:
- Often competitive rates
- Fast digital process
- 24/7 access to portal
Cons:
- Less personal service
- Harder to reach a human
- May struggle with complex situations
Direct Lenders
Examples: Specialized mortgage companies
Pros:
- Focused only on mortgages
- Often competitive
- May have specialized programs
Cons:
- No relationship benefits
- Limited other services
How to Get Mortgage Quotes
Step 1: Prepare Your Information
Before contacting lenders, gather:
- Estimated purchase price or refinance amount
- Estimated down payment
- Credit score (approximate is fine)
- Income and employment info
- Property type and location
Step 2: Contact Multiple Lenders
Minimum: 3 lenders Better: 5 lenders Ideal: Include different lender types (bank, credit union, broker, online)
Step 3: Request Loan Estimates
Ask each lender for a Loan Estimate (LE). This standardized form includes:
- Interest rate
- APR
- Monthly payment
- Closing costs itemized
- Cash to close
Timing: Lenders must provide LE within 3 business days of application
Step 4: Compare Within 14-45 Days
Credit score protection: Multiple mortgage inquiries within 14-45 days (depending on scoring model) count as one inquiry.
Why timing matters: Rates change daily. Compare quotes from the same day or close together.
What to Compare
Interest Rate vs APR
Interest rate: The percentage charged on your loan balance
APR (Annual Percentage Rate): Includes rate plus fees, spread over the loan term
Which to use:
- Rate for calculating monthly payment
- APR for comparing total cost between lenders
Example:
- Lender A: 6.5% rate, 6.7% APR
- Lender B: 6.375% rate, 6.75% APR
Lender B has a lower rate but higher fees. APR reveals Lender A may be cheaper overall.
Closing Costs
Compare Section A (Loan Costs) on the Loan Estimate:
| Fee Type | Range |
|---|---|
| Origination fee | 0-1% of loan |
| Application fee | $0-$500 |
| Underwriting fee | $300-$900 |
| Processing fee | $300-$700 |
| Points | 0-2% of loan |
Lender fees vary most. Third-party fees (appraisal, title) are more consistent.
Points vs No Points
Points: Upfront payment to reduce rate (1 point = 1% of loan)
No-points: Higher rate, lower upfront cost
Comparison example ($350,000 loan):
- Option A: 6.5% with no points, $4,000 closing costs
- Option B: 6.25% with 1 point ($3,500), $7,500 total closing costs
Monthly difference: $57 Break-even on points: $3,500 ÷ $57 = 61 months
If staying longer than 61 months, points pay off.
Lender Credits
Some lenders offer credits toward closing costs in exchange for higher rate.
Example:
- Standard: 6.5% rate, $0 credit
- Higher rate: 6.75% rate, $4,000 credit toward closing
Good if you want lower cash at closing or may refinance/sell soon.
Questions to Ask Lenders
About Rates and Fees
- What’s the interest rate and APR?
- Is the rate for points or no points?
- What are your origination fees?
- Are there any junk fees I should know about?
- What’s the total closing cost estimate?
About the Process
- What’s your typical timeline from application to closing?
- Who will be my point of contact?
- What documents do you need upfront?
- Do you underwrite in-house or outsource?
- What’s your communication process for updates?
About Lock-Ins
- How long is your rate lock period?
- Is there a fee to lock?
- What happens if rates drop after I lock?
- Can I extend the lock if closing is delayed?
About Programs
- Do you offer the loan type I need (FHA, VA, conventional)?
- Do you have down payment assistance programs?
- Are there any first-time buyer programs?
- What’s the minimum credit score you accept?
Negotiating Your Rate
Yes, You Can Negotiate
Many borrowers don’t realize rates and fees are negotiable.
What you can negotiate:
- Interest rate
- Origination fee
- Application fee
- Rate lock fee
- Processing fee
How to Negotiate
Use competing offers as leverage: “I have a quote from [Lender B] at 6.375% with $4,000 in closing costs. Can you match or beat that?”
Ask directly: “Is there any flexibility on your origination fee?” “Can you offer a lender credit to reduce my closing costs?”
Time it right:
- End of month (lenders have quotas)
- When rates have just dropped
- When lenders are competing for business
What Lenders Will (and Won’t) Negotiate
More flexible:
- Origination fees
- Application fees
- Junk fees
- Rate within their pricing grid
Less flexible:
- Third-party fees (appraisal, title)
- Government fees
- Prepaid items
Red Flags When Shopping
Warning Signs
“Too good to be true” rates: Advertised rates far below market often have hidden fees or require unrealistic qualifications
Pressure tactics: “This rate is only good today” or “Other buyers are lined up” suggests desperation
Vague fee answers: If a lender won’t give you specific numbers, walk away
Excessive upfront fees: Legitimate lenders rarely charge more than credit report fee before approval
No Loan Estimate: If they won’t provide one, they’re not serious
Questions That Reveal Problems
- Ask for a Loan Estimate—hesitation is a red flag
- Ask about their rate lock policy—unclear answers signal disorganization
- Ask who you’ll work with—if they can’t say, service may be poor
Sample Shopping Timeline
Week 1: Preparation
Days 1-2:
- Check credit scores
- Gather income/asset documentation
- Research lender types
Days 3-5:
- Create list of 5+ lenders to contact
- Prepare questions
Week 2: Collect Quotes
Days 6-10:
- Contact all lenders within this window
- Request Loan Estimates from each
- Ask follow-up questions
Week 3: Compare and Decide
Days 11-14:
- Compare all Loan Estimates side by side
- Negotiate with top 2-3 lenders
- Make final selection
Common Shopping Mistakes
Not Shopping at All
The biggest mistake. Even one hour of shopping can save thousands.
Only Comparing Rates
Look at the full picture: rate, APR, fees and service quality.
Shopping Too Late
Start shopping early in your home search. Last-minute shopping limits options.
Ignoring Lender Reputation
Check reviews, ask for references, research complaints. A low rate means nothing if the lender can’t close.
Falling for Advertised Rates
Advertised rates are for perfect scenarios. Your actual rate depends on your profile.
Frequently Asked Questions
How many mortgage lenders should I compare?
At least 3, ideally 5 or more. Include different lender types (bank, credit union, broker, online) for variety.
Does shopping for a mortgage hurt my credit?
Minimally. Multiple mortgage inquiries within 14-45 days count as one inquiry, dropping your score only 5-10 points temporarily.
How long should I spend shopping for a mortgage?
1-2 weeks is sufficient. Get all quotes within a short window so you’re comparing apples to apples.
Should I use a mortgage broker?
Brokers can be valuable—they shop many lenders for you. But also get quotes directly from lenders to compare.
Is the lowest rate always the best deal?
No. A lower rate with high fees may cost more overall. Compare APR and total costs, not just rate.
When should I lock my rate?
Lock when you’re comfortable with the rate and have a purchase contract. Locks typically last 30-60 days.
Michael Chen
Certified Financial Planner, Mortgage Specialist
Our team of mortgage experts provides accurate, up-to-date information to help you make informed decisions about your home financing.
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