How do I compare different mortgage products?
Congrats on taking the next steps in your homebuying journey! Deciding which lender to go with is a challenging yet important decision. Here are some things to consider to help you make a decision.
We’re often asked if it makes sense to shop around for mortgages with different lenders. Every lender is slightly different in the way they include or don’t include various costs or fees – this means that there will be some variance in what each lender offers you.
Before you decide to shop around, you should know that each lender will pull your credit history and this may hit your credit score – it is helpful to ask your loan officer when in the process they do this. If your credit is pulled by different mortgage lenders over the course of a shorter period of time, it has a smaller impact on your credit score. Many lenders are willing to have a preliminary conversation before you complete a full application.
If you do shop around, here are three things you should consider as you compare your mortgage pre-approvals from separate lenders:
1. Information You Report
In addition to the financial information included in your application, a lender wants to know what your ideal price point is. Ask your lender when they give you your pre-qualification or pre-approval if the purchase price is based on your goal or reflective of the maximum loan amount. This information influences your loan amount.
2. When You Submit Your Application
Interest rates fluctuate on a day-to-day basis because the market shifts daily. The timing of your application may impact the interest rate that a lender is estimating for your loan amount. If you’re given one rate at one lender a few weeks from the time you’re given another rate, you can ask the lender with higher rates if they will rate-match.
3. The Specifics of Your Selected Mortgage Product
Your interest rate and the loan amount will look different depending on the type of mortgage product you are considering. This will include the type of mortgage (fixed versus variable rate), the time period of the mortgage, and more. Talk to your lender about their various products and how each will impact your pre-approval.
You can use our cheat sheet to compare mortgage products!