Imagine getting your pre-approval letter from the bank, and now you’re one step closer to purchasing a home. You’ve been banking at ABC bank for years, and they’ve promised you the best mortgage rate possible. Next, you take your pre-approval letter to your realtor and express how badly you’re ready to start touring homes. Instead, your realtor suggests you begin mortgage shopping – a key way to finding the best mortgage rate and loan package possible. Nevertheless, you believe your bank has given you the best rate. So you reject the recommendation, and move forward with the financial institution that you trust.
Although you possibly could have received the best mortgage rate from your bank, would it have hurt to find out what other banks had to offer?
Not shopping for a mortgage can be the most expensive mistake you’ll ever make. Often times, buyers do not take advantage of the option, which could cost them thousands of dollars. We live in times where banks aren’t the most trusted businesses. Therefore, building a relationship with a bank does not guarantee financial security. So don’t be surprised if there’s a better deal elsewhere.
It is important to think of mortgage shopping just as you would shopping for anything else. Consider walking in to a grocery store and picking up a hand of bananas, does that mean that you have to purchase them? No! Strolling a car lot and test driving the most expensive car on the lot does not obligate you to buy it. Even during your home search, you’re not going to pay more for a house with less amenities, just because it was the first house you saw. For that reason, you should not go with your first mortgage quote!
Should you listen to mortgage shopping advice? YES!!!
After you receive your pre-approval letter, your first step should be to GET ANOTHER ONE. Generally speaking, one thing that gets misconstrued by the masses, is that shopping for a mortgage will affect your credit score. It is true, hard inquires do impact your credit score. However, mortgage and auto loan shopping has become increasingly popular. Therefore, multiple hard inquires within a certain time period for a home or auto loan are generally counted as one inquiry. You need to be aware that hard inquiries are only short term. Signing a 30 year mortgage will be much more impactful and will outlast any hard inquiry on your credit report. Do not allow a short term misfortune to become a long lasting effect.
In conclusion, shopping for a mortgage is an essential step to securing financing for a home purchase. Fortunately enough, the federal government also acknowledges the important of mortgage shopping. As a result, the department of Housing and Urban Development in conjunction with several other government agencies has created a guide to help you shop for mortgages. We have provided the guide for you. Download it and use it.
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