Though today’s relatively high mortgage rates have made homebuying considerably more expensive than during the height of the pandemic, shopping around for a mortgage and comparing offers from lenders could help borrowers save a significant amount of money, according to a new study by LendingTree.
To show how much money those who shop around could save, LendingTree analyzed data from users of its online shopping platform who received three or more offers from mortgage lenders. With this data, they calculated how much borrowers in each of the nation’s 50 largest metropolitan areas could save if they chose the lowest APR offered instead of the highest.
In doing so, LendingTree’s study found that shopping around for a mortgage could help borrowers across the nation’s largest metros save an average of $84,301 over the lifetime of their loans.
Key findings from the study:
- Borrowers in the nation’s 50 largest metros could save an average of $84,301 over the lifetime of their loans by shopping around for a mortgage. This breaks down to an average savings of $2,810 a year and $234 a month.
- San Jose, Calif., San Francisco and Los Angeles are the metros where borrowers could save the most over the lifetime of their mortgages. Across these three metros, borrowers could save an average of $149,146 over the lifetime of their loans by shopping around.
- Across the nation’s 50 largest metros, the average spread between the highest and lowest APR offered to borrowers is 99 basis points. Getting offered a loan with a rate 0.99 percentage points lower than another might not seem like a big deal, but it could help you save tens of thousands of dollars (or more) over the lifetime of your loan. When talking about loans typically worth hundreds of thousands of dollars, getting an APR that’s even 10 basis points lower than another could make a notable difference in how much a mortgage costs over its lifetime.
- Minneapolis, Milwaukee and Columbus, Ohio, borrowers see the largest spreads between the average lowest and highest APRs offered. In these metros, the average spread is 117 basis points—18 above the 50-metro average. Despite having the biggest spreads, these metros don’t boast the highest lifetime loan savings as borrowers there have substantially lower average mortgage amounts than in places like San Jose or San Francisco.
- The more offers a borrower can get, the more they’re likely to save. Nationwide, borrowers who only receive two offers could save an average of $35,377 over the lifetime of their loans, while borrowers who get more than five offers could save an average of $105,912 — or an additional $70,535. These larger savings are possible because borrowers who receive more offers tend to have higher credit scores that allow them access to lower minimum APRs and take out bigger mortgages.
Metros where borrowers could save the most by shopping around for a mortgage
No. 1: San Jose, Calif.
- Average lowest offered APR: 6.49%
- Average highest offered APR: 7.40%
- Spread between average highest and average lowest APR: 0.91 percentage points
- Lifetime savings: $157,758
No. 2: San Francisco
- Average lowest offered APR: 6.49%
- Average highest offered APR: 7.43%
- Spread between average highest and average lowest APR: 0.94 percentage points
- Lifetime savings: $151,371
No. 3: Los Angeles
- Average lowest offered APR: 6.52%
- Average highest offered APR: 7.50%
- Spread between average highest and average lowest APR: 0.98 percentage points
- Lifetime savings: $138,309
No. 4: San Diego
- Average lowest offered APR: 6.53%
- Average highest offered APR: 7.51%
- Spread between average highest and average lowest APR: 0.98 percentage points
- Lifetime savings: $130,900
No. 5: Seattle
- Average lowest offered APR: 6.59%
- Average highest offered APR: 7.55%
- Spread between average highest and average lowest APR: 0.96 percentage points
- Lifetime savings: $119,458
No. 6: Boston
- Average lowest offered APR: 6.62%
- Average highest offered APR: 7.64%
- Spread between average highest and average lowest APR: 1.02 percentage points
- Lifetime savings: $115,065
No. 7: Washington, D.C.
- Average lowest offered APR: 6.63%
- Average highest offered APR: 7.64%
- Spread between average highest and average lowest APR: 1.01 percentage points
- Lifetime savings: $113,321
No. 8: Denver
- Average lowest offered APR: 6.58%
- Average highest offered APR: 7.56%
- Spread between average highest and average lowest APR: 0.98 percentage points
- Lifetime savings: $102,944
No. 9: Riverside, Calif.
- Average lowest offered APR: 6.66%
- Average highest offered APR: 7.69%
- Spread between average highest and average lowest APR: 1.03 percentage points
- Lifetime savings: $101,439
No. 10: Sacramento, Calif.
- Average lowest offered APR: 6.62%
- Average highest offered APR: 7.61%
- Spread between average highest and average lowest APR: 0.99 percentage points
- Lifetime savings: $99,212
In summary:
“Though borrowers in more expensive parts of the country tend to save the most money by shopping around, serious savings can be found just about anywhere,” said LendingTree’s Senior Economist and report author, Jacob Channel. “Owing to this, even borrowers in more sparsely populated areas should consider shopping around for a mortgage lender before they buy.”
To see the full report, visit: : https://www.lendingtree.com/home/mortgage/mortgage-shopping-study/
