It may seem like a mortgage is a mortgage, but the reality is that there are many different types of mortgages available, all with very different terms. If you want the best possible situation, it’s important to shop around to see what’s available to you.
But how exactly should you go about this? And how do you know if a mortgage is the right fit for you?
Why Shopping Around Is Worth the Effort
A home is likely the biggest purchase you’ll make in your lifetime, and your mortgage will shape your financial picture for years, or even decades to come. Even a minute difference in interest rates can have a major impact. For example, on a $350,000 loan, a 0.5 percent difference in your interest rate could mean paying over $35,000 more in interest over a 30-year term. That amounts to a vacation every year, college savings, or a faster route to paying off your mortgage early.
And it’s not just about the interest rate. Different lenders charge different origination fees, discount points, application fees, and closing costs. One lender may offer a lower rate but charge higher upfront fees, while another may offer more competitive pricing overall.
By comparing offers, you gain a clearer picture of what you’re signing up for, but also negotiating power. If one lender offers better terms, another might be willing to match or beat it once they know you’re shopping around.
How to Shop for a Mortgage the Right Way
The idea of comparing mortgage lenders can sound overwhelming, especially if this is your first home purchase. But it’s more manageable than it seems, especially if you follow a step-by-step approach.
Start by identifying at least three lenders to compare. This can include traditional banks, credit unions, online lenders, and even mortgage brokers. Each type has different advantages, and it’s worth seeing how they stack up against each other.
Next, request loan estimates from each lender. A loan estimate is a standardized document lenders are required to provide, which makes side-by-side comparisons much easier. It includes the interest rate, monthly payment, estimated taxes and insurance, and the total closing costs, including any lender fees.
Look carefully at the APR (Annual Percentage Rate), which reflects the true cost of the loan, including interest and fees. Also take note of how points, fees, or credits are applied — and whether they’re worth it based on how long you plan to stay in the home.
You’ll also want to compare loan terms and options: for example, fixed vs. adjustable rates, 15- vs. 30-year loans, or special programs like FHA or VA loans if you qualify. Even if you’ve already decided what kind of mortgage you want, knowing what each lender can offer helps confirm you’re on the right path.
Don’t Worry Too Much About Your Credit Score
One reason some people hesitate to shop for a mortgage is the fear that multiple credit inquiries will hurt their score. The good news is that credit scoring models are designed to treat multiple mortgage inquiries made within a short time frame (usually 14 to 45 days) as a single inquiry. This “shopping window” means you can compare multiple lenders without significant impact on your credit, as long as you do it within that period.
Consider the Full Customer Experience
Numbers matter, but so does service. A low rate isn’t worth much if the lender is difficult to work with, slow to respond, or lacks transparency. Ask questions early on and gauge how responsive and clear they are in their answers.
You might also check online reviews, ask your real estate agent for input, or talk to friends and family who’ve recently bought homes. Lender reputation and communication quality are important, especially if your mortgage journey encounters any bumps along the way.
Be Prepared to Negotiate
Once you have offers in hand, you’re not obligated to accept any of them as-is. If you find a better rate or more favorable terms elsewhere, bring it to your preferred lender’s attention. Many are willing to match or beat a competing offer to earn your business. And if you’re using a mortgage broker, know that part of their role is to negotiate on your behalf. Don’t be afraid to push for better terms or to clarify anything that seems off.
The Bottom Line
Choosing a mortgage is a major decision, and the lender you choose plays a big role in how affordable and smooth your homebuying process will be. Shopping around takes a little time, but it’s a powerful way to protect your finances and make sure you’re getting the best deal available.
Compare multiple lenders, look at the full picture (not just the rate), and be proactive about asking questions. Your future self will thank you.
