You’ve seen the headlines: Mortgage rates are low—like really, really low. In fact, just last week they hit their lowest point in over three years. And with the uncertainty surrounding the coronavirus outbreak? There’s a chance they could go even further.
Still, it’s important to remember that these are average rates. The numbers reported by Freddie Mac and the Mortgage Bankers Association each week speak to broad trends—not rates per credit score bucket, loan-to-value ratio or even geographic area.
So while those average rates might be low on the surface, that doesn’t mean every borrower is going to get them—especially those who don’t shop around.
A new analysis from loan marketplace LendingTree is case in point. The study looked at mortgage rate spreads per borrower across all major metros in the U.S. The major takeaway that emerged: Comparison shopping is important no matter how low rates seem to go.
Take San Francisco home shoppers, for example. According to LendingTree’s findings, San Francisco borrowers who only get one mortgage quote will spend about $66,000 extra in interest by the end of their loan term. Those who shop around? They’ll shave about $186 off their monthly payments and more than $2,000 annually.
Fresno, California, homebuyers can also see big savings. One-quote shoppers spend an additional $61,000 on interest, while comparison shoppers enjoy payments $172 lower each month. Other cities high on the savings list were Los Angeles; Portland, Oregon; Washington, D.C.; Las Vegas; Seattle; Boston; Minneapolis; and Phoenix.
If you’re just looking at how much rates can vary, Las Vegas borrowers see the biggest discrepancies. According to LendingTree’s findings, rates can vary more than a full point for the same borrower. Milwaukee and Virginia Beach, Virginia, also see spreads of a full percent or higher.
As Tendayi Kapfidze, LendingTree’s chief economist, explains, “It pays to do your research.”
For existing homeowners looking to refinance, the biggest spreads are in Louisville, Kentucky.; Oklahoma City; Grand Rapids, Michigan.; Albuquerque, New Mexico; and Minneapolis. In Louisville, refi shoppers who get at least five quotes can see rates as far apart as 1.32%.
According to Patrick Boyaggi, CEO of Mortgage loan marketplace Own Up, shopping around between mortgage lenders is important, but so is comparing offers from individual loan officers at the same mortgage company.
“Some lenders vary the rates and terms they offer based on the different commission plans they offer to their loan originators,” Boyaggi says. “By talking to one loan originator versus another, the rate can change by 0.50% or more. When you are talking about a $400,000 loan, that’s tens of thousands of dollars in excess interest. The money you save by searching for your best deal can be used toward other financial goals, like saving for retirement or a child’s college tuition.”