Buying a home? This mortgage mistake can cost you
Bankrate chief financial analyst Greg McBride discusses whether people should refinance their homes and how mortgage rates are affected by the Federal Reserve’s interest rate decisions.
For many Americans, a home will be the most expensive purchase they ever make.
Shouldn’t they shop around a little?
Yet more than a third of homebuyers said they got just one quote before signing a mortgage, according to a new survey from Fannie Mae. That means they could be missing out on thousands of dollars -- if not more -- in savings.
Obtaining two or more quotes can give consumers more leverage when negotiating the terms of a mortgage. More than a third of homebuyers who obtained multiple quotes successfully negotiated a better interest rate, according to the survey. Others were able to negotiate on terms like discount points, mortgage insurance, origination fees and appraisal fees.
“By not shopping around to give themselves leverage when negotiating their mortgage, some homebuyers are leaving money on the table,” wrote Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Competition only works if consumers assess their options.”
More than a fifth of homebuyers who got just one quote said they later regretted it, according to the survey.
The most common sources of information on selecting a lender that homebuyers said they turned to were real estate agents and family and friends, the survey found. In a report accompanying the survey, Duncan wrote that may partially explain why so many people didn’t look for more quotes.
“Many recent homebuyers who received only one quote reported doing so because they were more comfortable with that particular lender,” he wrote. “Non-shoppers also reported much less concern with competitive terms when selecting a lender, citing other non-financial priorities, such as customer service/responsiveness and having a preexisting account with a lending institution.”
Rogers Healy & Assoc. Real Estate owner Rogers Healy on the state of the housing market.
There’s also a lot that homebuyers need to get organized during the time crunch of signing a home purchase contract.
“Unfortunately, comparison shopping for a mortgage can be a much more complicated and time-consuming endeavor,” Duncan wrote. “Simply evaluating the ‘price’ of a mortgage involves looking at several interrelated components – including rates, fees, and points – and making an assumption about how long a borrower will stay in that mortgage.”