Once borrowers begin their home-buying process, they rarely shop around for their mortgage, most often preferring to go with the first lender they find.
The Consumer Financial Protection Bureau previously cited that almost half of borrowers seriously consider only a single lender or broker before deciding where to apply. And 77% of borrowers only end up applying with a single lender or broker.
As it turns out, this could be causing them to lose out on a lot of money, according to the April Insight report from Freddie Mac.
By examining the dispersion of 30-year fixed mortgage rates across all lenders during a typical week, Freddie Mac could that borrowers could save an average of $1,500 over the life of the loan by getting just one additional rate quote.
In fact, 80% of borrowers who obtain one additional rate quote while shopping for a mortgage will save between $966 and $2,086 over the life of the loan.
And that savings increases to $2,914 if the borrower receives five rate quotes. About 80% of borrowers who obtain five quotes will save between $2,089 and $3,904.
“By shopping more than one mortgage lender, consumers are more likely to get a better interest rate and save money in both the short and long term,” said Len Kiefer, Freddie Mac chief economist. “With lower monthly payments and lower fixed fees, the loan will be more affordable and thus safer, and consumers may have hundreds or thousands of dollars more in their pockets. Not a bad return for a few phone calls or clicks.”
Freddie Mac explained that three factors will affect how much savings borrowers will see by shopping around for their mortgage:
1. The savings will be proportionate to loan size.
2. Borrowers who expect to have their mortgage for a longer term, and neither refinance nor move, will gain more from a reduced rate.
3. The dispersion of rate offers greatly affects the amount of savings.