People spend months picking a house and an afternoon picking a mortgage. Research from two very different organizations keeps landing on the same conclusion about what that costs.
How many people actually shop?
Fewer than you would guess. A CFPB report found that almost half of consumers do not shop around before applying, and that three out of four apply with only one lender or broker.
Its director at the time put it this way: “Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating.”
The same survey work found 70 percent of borrowers rely a lot on their lender or broker for mortgage information. That is the one party in the room being paid on the outcome.
Why do people skip it?
Mostly because they think it will not matter. The CFPB notes that in a national survey, most recent borrowers said they believed they would pay the same price no matter which lender they chose.
That belief is wrong, and it shows in behavior. The largest single group of borrowers seriously consider only one lender, and few consider more than two.
Confidence changes things. Consumers who felt sure about their knowledge of available rates were almost twice as likely to shop.
What does the price gap look like?
The CFPB studied 2021 loan data and found that prices for the same borrower vary across lenders. It calls this price dispersion.
Its finding: dispersion is “often around 50 basis points of the annual percentage rate,” or APR, which is the yearly cost of the loan once fees are counted.
That held across every big slice of the market. Loans bought by Fannie Mae and Freddie Mac, the two government sponsored companies behind most ordinary mortgages. Loans insured by the Federal Housing Administration, or FHA. Loans backed by the Department of Veterans Affairs, or VA. And jumbo loans, meaning loans too large for those standard programs.
Then it translated the number. On a $300,000 loan, a 30 year fixed payment at 6.5% is $1,896 a month. At 7.0% it is $1,996. That is $100 a month, or a payment about 5.3 percent higher, for picking a different company. Put $3,000 of lender fees on each of those and our own calculator makes them an illustrative 6.60% APR and 7.10% APR.
What did the other research find?
Freddie Mac ran a different study, in a different year, with different methods. It reached a similar place.
Its 2018 research reported that “borrowers could save an average of $1,500 over the life of the loan by getting one additional rate quote and an average of about $3,000 for five quotes,” on a typical $250,000 loan.
A later Freddie Mac piece looked at the high rate months of 2022. It found borrowers who got two rate quotes could have saved as much as $600 a year, and those who got at least four could have saved more than $1,200 a year.
There is also an older CFPB estimate. Its shopping study noted that failing to comparison shop “costs the average homebuyer approximately $300 per year and many thousands of dollars over the life of the loan.”
Are these numbers the same number?
No, and it matters. Each comes from a different year, a different rate environment, and a different method. Do not add them together or average them.
Read them as four independent studies that all point the same direction. That agreement is the finding.
Is anything guaranteed?
No. Freddie Mac says so itself. Some borrowers get lucky on the first try, and in some markets there is simply less spread to capture.
Freddie Mac also flags a real trade off: applying to several lenders in a short window carries some credit score risk, and each borrower has to weigh that against the savings.
What this means for you
Get three real quotes, ideally on the same day, for the same loan, with the same points. Ask for a Loan Estimate from each, because the standard form makes the offers comparable.
Watch what the spread does to your own loan. On this $320,000 loan at 6.5%, an illustrative 6.59% APR with $3,000 in lender fees, principal and interest are $2,023, and the first 5 years cost about $104,112. Drop the rate a quarter point in the box above and see the change.
Shopping is one of the few ways to lower a mortgage that costs you nothing but a few phone calls.