December 16, 2021
Why should you shop around for your home loan or refinance loan? Aren’t all mortgages and refinance loans pretty much the same? No, actually, you may find a larger degree of variation among lenders in several ways including what kinds of loan they are willing to offer.
Shopping around for a lender is always a good idea even if you are fairly certain you want to continue using your current financial institution to get the new loan or refinance.
In the same way you want to shop around for the best-used car dealer you can find, you want to find the lender offering the best deal to you for the money you are spending on closing costs, lender fees, etc.
FHA home loans may be standardized in many ways–the types of fees and expenses you can be charged, the kinds you cannot be charged, the amount of your minimum required down payment, etc.
But participating lenders have their own “overlays” or higher minimum standards and other requirements–and these WILL vary more among lenders than you might think.
Some FHA lenders are not interested in offering mobile home loans. Others may not offer condo loans. Still others may offer both but charge rates and fees that aren’t as competitive as you may find elsewhere.
Shopping around for your loan means a few basic things:
- You may find variation in the interest rates charged.
- You may find variances in the fees and closing costs.
- You may find your lender is willing to work with you as a first-time buyer.
- You may find your current lender is willing to offer you a better deal when you present other lender’s terms and costs to the current bank.
If it sounds like some lenders don’t automatically reprice their loans based on certain interest rate fluctuations, you are correct.
There are reasons why a lender might choose not to raise interest rates even on a day when rates have gone up fairly across the board.
One reason–and this is important for more than one reason–is that the lender may choose to adjust closing costs instead of raising the interest rate.
When you compare lenders, don’t neglect to ask about closing costs along with interest rates as these two things together will tell you more than one detail or the other all alone. Get both numbers from every lender you speak with and be sure to provide those numbers to other lenders to see if they might be willing to offer you a more competitive deal.
It’s not easy to negotiate or haggle over these things, but if you need to save money upfront on your mortgage and reduce your out-of-pocket costs, you’ll need to get used to the idea of negotiating. It can help you save that money and get you a more affordable loan.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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