You should get preapproved for a mortgage before you begin looking for a new home to help you figure out how much you can afford to spend. This will also give a seller confidence that you’ll be able to obtain financing.
Being preapproved doesn’t mean that you’re obligated to borrow from that particular lender. You can, and should, compare terms from multiple lenders before you buy a house.
The Terms a Lender Offered You May no Longer be Available
Interest rates go up and down often. When you get preapproved for a home loan, the lender quotes you terms that are only available for a limited amount of time. If you want to buy a house after that period has expired, the lender may not be willing to give you a loan with the same interest rate it initially quoted you.
Another Lender May Offer Better Terms
Lenders have their own ways of deciding which mortgage terms to offer to customers. If you submit your financial information to numerous companies, you may receive a wide range of offers. Another financial institution may quote you a lower interest rate and/or lower closing costs. You may be shocked by how much money you can save simply by doing some comparison shopping.
Don’t Worry About Hurting Your Credit Score
Hard inquiries can lower your credit score a bit, but the good news is that requesting quotes from several mortgage lenders in a short period of time won’t cause much damage. If you submit all the applications around the same time, they will be counted as a single hard inquiry. That window can be 14 to 45 days, depending on which credit scoring model the lenders use.
How to Get the Best Deal Available
Some lenders will give you quotes assuming you’ll buy discount points. That means you will have to pay a fee at closing in exchange for a lower interest rate. Other lenders will quote you interest rates without points. You may have to contact lenders that give you quotes with points and ask what their interest rates would be without them so you can make an apples-to-apples comparison.
Closing costs include several fees. In some cases, you will be able to shop around for those services. That means you shouldn’t focus on those fees when comparing closing cost estimates from different lenders. If you find a better deal than the price quoted on the Loan Estimate, you’ll be able to get that price no matter which lender you choose.
Having multiple loan offers can give you negotiating power. You may be able to get one lender to match or beat another’s terms to earn your business. Even a modest reduction in your interest rate may save you tens of thousands of dollars in the long run.
