Nearly seven in 10 mortgage shoppers submit only one application.
A buyer can save $1,100 a year by reducing their mortgage rate 50 basis points when they purchase a typical U.S. home.
A savings of this size would have made 22,000 more homes on the market affordable for a median-income U.S. household.
If you’re buying a house, you look at more than one home before making a decision, right? When it comes to selecting a mortgage, it also pays to consider more than one financing offer, but a new report from Zillow found most buyers don’t.
Nearly seven in 10 home buyers apply with just one mortgage lender, according to Zillow’s Consumer Housing Trends Report. That shortcut can be expensive, potentially adding tens of thousands of dollars to the cost of a home over the life of a loan.
Mortgage rates vary more than many buyers realize. Even a difference of half a percentage point can significantly change a monthly payment — and a buyer’s long-term financial picture.
On a typical U.S. home priced around $360,000, a buyer with a 6.24% 30-year fixed mortgage (the November average) would pay about $2,345 a month. At 5.74%, a rate commonly seen by shoppers who compare multiple lenders, that payment drops to $2,253.
That’s roughly $1,100 a year in savings — money that stays in the buyer’s pocket instead of going to interest.
An increase in affordability
In fact, Zillow estimates that those savings would have made 22,000 more homes nationwide affordable to a median-income household in November alone.
Rate shopping matters everywhere, but it can be a game changer in higher-cost markets.
In San Jose, a lower rate could save a buyer about $4,750 a year.
Buyers in six other major metros could save more than $2,000 annually.
In Dallas, rate shopping would have brought more than 1,200 additional listings within reach of a typical buyer’s budget — the most of any metro in the country.
For buyers struggling with affordability, that difference can mean the difference between settling and finding the right home.
Why rates vary so much
Many shoppers assume mortgage rates are essentially the same everywhere. They’re not.
Lenders weigh credit scores, income, loan types, and market conditions differently. Past research shows just how wide the gap can be:
A Zillow analysis found spreads of 90 to 130 basis points between the best and worst offers for similar borrowers.
A more recent Freddie Mac study found rates can shift 50 basis points in either direction depending on the lender.
In other words, the same buyer can receive very different offers — simply by asking.
While a lower interest rate usually means a lower monthly payment, experts caution buyers to look beyond the headline number. Loans with lower rates may come with:
Higher closing costs
Larger down payment requirements
Other fees that offset the savings
The key is to compare the entire loan package, not just the interest rate.