Because I am in the process of buying a home, I have spent a lot of time getting financially prepared. One of the most important things that I did was to get multiple quotes from different mortgage lenders.
Here’s how many quotes I obtained, along with some insight into why I got so many different loan estimates.
When I started shopping around to find the perfect mortgage, I made the choice to get five different quotes. I obtained quotes from:
Lenders that I had a pre-existing relationship with: I have a business bank account with one institution and a personal bank account with another. Both have sent me targeted advertisements promising benefits if I get my mortgage through them. I also have my investment and credit cards with a third financial institution and was promised a discount in my mortgage costs if I borrowed with them. I got quotes from those three places.Lenders that have a solid reputation: I also decided to get quotes from two online lenders that have solid reputations for making the borrowing process easy and quick and offering an all-digital borrowing experience.
While I could have shopped around more, most of the quotes I got were pretty similar. Because of that, getting these five different loan estimates seemed as if it was enough to give me a pretty clear idea of where I stood.
Getting mortgage quotes does take some time, especially since I’m self-employed and had to enter quite a bit of information about my income and assets. So I didn’t see the point in continuing to ask lenders for rates when so many of the quotes I received were so similar as it was.
The exact number of mortgage quotes you should get is up to you and comes down to how much time you want to spend shopping around.
In most cases, though, three to five quotes is a good number. Unless you’re seeing a ton of variation in pricing from one lender to another, you can usually feel pretty confident that you’ve done a good job shopping for the best rate after getting three to five estimates.
There are a few caveats to consider, though, to make sure you truly are shopping around in a smart, effective way.
Many lenders will allow you to check rates without putting an inquiry on your credit report (although a hard credit check will eventually be necessary when you submit your full application). This is important because too many inquiries can hurt your credit score.
While lenders and credit reporting agencies usually group together multiple inquiries over a short-term period with the assumption you were shopping around for a loan, you may be asked to explain each inquiry when you go through the full mortgage application process.
That’s what happened to me. I got one quote that required a hard credit check and then went with a different lender, so I had to write a letter of explanation about that inquiry. If you don’t want to explain a half dozen inquiries, stick with lenders that offer soft credit checks at the start.
Banks, credit unions, and online lenders all offer mortgages. You’ll want to get quotes from all different kinds of lenders to see which is better for you.
I thought that going with one of the banks I do business with would be the best deal, especially since I was offered discounts, but that turned out not to be the case for me. An online lender was better than a large national bank, even though I’d been given special offers. But I wouldn’t have known that if I didn’t branch out beyond my comfort zone and given other mortgage issuers a chance.
Don’t limit your options. Be sure to really take the time to see all the offerings out there. Ultimately, the difference in my rate — and thus monthly mortgage payments — was dramatic, and I might have missed finding the right loan had I stopped at just three quotes.
You should also remember that the process of getting quotes takes time. Start looking online and comparing rates well before you actually go to look at your first potential home. You can find the right lender, get pre-approved, and be ready to make an offer when the home of your dreams comes along.
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