A recent study by Zillow Home Loans suggests that only 13% of potential buyers research a mortgage before applying. In fact, people spend more time researching vehicles and vacation destinations than researching a home loan.
This lack of research could cost mortgage borrowers thousands of dollars. It’s always been important to shop around for the best mortgage deal and understand how to improve your credit score before you apply. But at a time when mortgage rates are at record highs, it’s more important than ever.
- A recent study by Zillow Home Loans suggests that only 13% of potential buyers research a mortgage before applying.
- 30% of potential homebuyers in Zillow’s survey said they were worried that making multiple mortgage applications would negatively affect their credit score. It will usually not
- Paying off existing debts, paying your bills on time, and regularly reviewing your credit report for errors can all boost your credit score and ultimately lower the cost of your mortgage.
Home buyers don’t shop
It’s long been known that potential buyers don’t spend a lot of time researching mortgage options, but recent research from Zillow Home Loans has put some numbers on the extent of the problem.
Zillow’s survey shows that 72% of potential buyers don’t shop around for a mortgage before applying, and only 13% said they spent at least a month researching mortgage lenders. To put that number into perspective, 28% of people said they spent at least a month researching vehicles before buying one, and 23% said they spent at least that much time researching vacation options. In fact, survey respondents spent as much time looking for a new TV as they spent on their mortgage.
The main reason for this lack of research? A concern that applying for multiple mortgages could hurt borrowers’ credit ratings. 30% of potential homebuyers in Zillow’s survey said they were worried that making multiple mortgage applications would negatively affect their credit score. This usually won’t be the case – although pre-approval for a mortgage can impact a credit score, buyers can shop around and submit multiple applications over 45 days with only one result on their credit score.
Why you should shop for a mortgage
The low level of research that most home buyers do before applying for a mortgage could cost them thousands of dollars. The average mortgage in the United States is now over $400,000, so saving just 1% on your interest rate can mean big savings over the life of your loan.
Libby Cooper, vice president of Zillow Home Loans, points out that a mortgage is often the most important financial decision a person makes. “Taking the time to understand your credit report, fix any issues, and consult with a qualified mortgage professional,” she adds, “can make a significant difference to a homebuyer’s experience.”
However, as Zillow’s research indicates, many people don’t fully understand how credit scores work. This prevents them from looking for a good deal, but it could also mean that they are paying more than necessary for a mortgage. Another recent analysis from Zillow shows that buyers with “fair” credit could pay hundreds more on their monthly mortgage payment than those with “great” credit.
For this reason, the best approach to negotiating a mortgage is often to focus on your credit score first, and only then to approach mortgage lenders. Different lenders offer different rates, of course, but they also usually offer better rates if you have a good credit score. Paying off existing debts, paying your bills on time, and regularly reviewing your credit report for errors can all boost your credit score and ultimately lower the cost of your mortgage.
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