How Comparing Mortgage Lenders (and rates & fees) Can Save Home Buyers Thousands

Buying a home is exciting — but when it comes time to get a mortgage, many buyers unknowingly make an expensive mistake: they go with the first lender they talk to.

It may feel convenient. The lender helpful. And once you’re pre-approved, it can feel like switching lenders later is complicated or risky.

But here’s the truth: shopping around and comparing mortgage lenders for your mortgage can save you tens of thousands of dollars over the life of your loan.

Let’s walk through why it matters, how to do it safely, and the best ways to compare your options — especially if you’re buying your first home.

A Small Rate Difference Can = A Big Money Difference

Even a tiny change in interest rate can make a huge impact.

For example, on a $500,000 loan:

• 6.75% vs 6.25% could save you over $150 per month

• That’s more than $54,000 over 30 years!

That’s real money — and many buyers never realize better options were available.

When Should You Start Shopping and Comparing Mortgage Lenders?

Before you commit to a lender for pre-approval. You can talk to multiple lenders during the pre-approval phase — and you should. This is the best time to compare rates, fees, and loan options.

Will Shopping for a Mortgage Hurt My Credit Score?

This is one of the most common fears among home buyers.

When you apply for a real pre-approval, lenders will run a hard pull on your credit. This may cause a very small, temporary dip in your score — often just a few points. But hard inquiries are required so lenders can verify your credit history accurately.

Mortgage Rate Shopping is Protected by Credit Scoring Rules

The good news is that credit bureaus understand that people shop for mortgages, thus multiple mortgage-related hard inquiries made within a short window - usually 14 to 45 days - are typically treated as one single inquiry for scoring purposes.

That means you can safely:

• Apply with a mortgage broker

• Talk to a bank or credit union

• Compare online lenders

• All without affecting your credit multiple times

What About Soft Inquiries?

Soft credit pulls are used for quick pre-qualification tools and estimates online. They don’t affect your score — but they also don’t provide a true mortgage approval. For real home shopping, a hard inquiry is normal and necessary.

The Best Ways to Shop for Mortgage Rates

Mortgage Brokers (Great for First-Time Buyers)

Brokers shop your loan across many lenders to find competitive rates and terms.

Pros:

• Multiple lenders at once

• Often lower rates

• Save time

• Clear explanations (when using a good mortgage broker)

Cons:

• Sometimes include a broker fee (often built into the loan)

Banks & Credit Unions

They offer their own loan products.

Pros:

• Familiar

• Some great first-time buyer programs

• Credit unions often have lower fees

Cons:

• Limited to one lender’s rates

Online & Direct Lenders

Fast and easy to compare.

Pros:

• Quick quotes

• Sometimes very competitive

Cons:

• Less personal guidance, information, and support

Comparison Websites

Helpful for seeing what’s competitive today — just remember final rates depend on your finances. There are many available online, but here's one of the most popular: Bankrate.com

What to Compare (Not Just the Rate)

Always look for, or ask if you not provided to you:

• Interest rate

• Closing costs & fees

• Monthly payment estimate

• Loan type

• Prepayment penalties

A slightly higher rate with lower fees could be a better deal.

Final Takeaway for Buyers

• Shopping lenders is smart — not risky

• Hard inquiries are normal and protected when grouped

• Comparing saves real money

• Don’t rush into the first offer

A little effort now can save you thousands later.

Thanks for reading!

-Joe

You can listen to the podcast for this article below. Please note that the podcast is AI generated from this blog article.

Buyer FAQ's — Mortgage Shopping & Credit Pulls

Will shopping for mortgage rates hurt my credit score?

Not when done correctly. When you apply for multiple mortgage quotes within a 14 to 45 day shopping window (depending on the credit scoring model), all those credit checks are treated as one single inquiry for your credit score. This allows you to safely compare lenders without damaging your credit.

What’s the difference between pre-qualification and pre-approval?

• Pre-qualification:

  • Usually uses a soft credit pull (no score impact)

  • Gives a rough estimate of what you might afford

  • Not strong enough for making offers

• Pre-approval

  • Uses a hard credit pull

  • Verifies income, debts, and assets

  • Makes your offer much stronger with sellers

How many lenders should I compare?

Ideally 3 to 5 lenders. This gives you:

• Competitive interest rates

• Lower fees

• Better loan options

Even small differences can save thousands over the life of the loan.

Do all hard credit pulls count as one?

For mortgage, auto, and student loans — yes.

As long as they happen within the credit “shopping window,” credit bureaus group them together as one inquiry.

Should I choose the lowest interest rate automatically?

Not always.

Look at:

• Closing costs

• Lender fees

• Loan type

• Rate lock period

Sometimes a slightly higher rate with lower fees costs less overall.

When should I lock my mortgage rate?

Usually after:

• You’ve chosen your lender

• You’re under contract on a home

• The lender you've chosen and are working with will advise you when a good time to lock is based on market conditions.

Can I switch lenders after getting pre-approved?

Yes. Many buyers start with one lender and later switch if they find better terms — just stay within the credit shopping window.

Is using a mortgage broker better than a bank?

It depends.

• Mortgage brokers shop multiple lenders for you.

• Banks & credit unions offer direct loan products (sometimes with perks).

• Many buyers compare both.

How long does a mortgage approval usually take?

Most approvals take 30–45 days, though some lenders can close faster.

Does checking rates online affect my credit?

Rate comparison tools usually use soft pulls — no impact on your score. Once you formally apply, that’s when hard pulls occur.