Reasons why you should be shopping around for your mortgage

A lot of homebuyers have the misconception that they are locked into using the lender that they obtain their pre-approval from. Another false belief is that obtaining a second or third pre-approval from a different lender will decrease your credit score. Well no need to fear, because neither of these are true. 

What many people do not know is that you can shop around for a mortgage to get the best rate just like you can shop for the best price of any other consumer product. Also, you have the right to change your lender at any point, including after you get into contract on a home (although it is not advised at that stage). 

One thing to note though is that interest rates change daily. So getting a pre-approval with a quote for a rate today does not mean it will be the same rate by the time you get into contract on a home in the future. It could be higher or it could be lower. 

The primary benefit of shopping around for a mortgage is that you can compare not only the rates that are being offered, but also the closing costs or incentive offers for rebates towards your closing costs. Every lender has different criteria for how they qualify a buyer based on the buyer’s financial situation. Some banks offer special rates for their customers, and some mortgage brokers offer better incentives than a big bank would. This is why you have to shop around to find out what is best for you. 

It is worth pointing out that credit bureaus give homebuyers a bit of leeway when they are shopping for a mortgage on a home. Most mortgage applications are not hard credit pulls, so they do not negatively impact your score the same way applying for a credit card or car loan would. So this gives homebuyers the opportunity to apply for a mortgage at more than just one lender.

The last benefit to note is that once you get into contract for a home, if you notify each lender that you have a quote from a competing one, they may come back with a better offer for you in order to earn your business. This is not a guarantee, but it has sometimes worked in a buyer’s favor. From there, you can make your decision based on which lender is providing you the best offer for your financial situation.