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Homebuyers: Shopping Around for Savings

LendingThe latest data from Freddie Mac's Primary Mortgage Market Survey [1] revealed that mortgage rates were approaching a two-year low. The 30-year fixed-rate mortgage rate fell to 3.82% recording the sixth consecutive week of decline and its lowest since September 2017, the survey found.

According to Sam Khater, Chief Economist at Freddie Mac, while the low rates indicate a good opportunity for borrowers to save on mortgage, Freddie Mac research has found that there can be a "wide dispersion among mortgage offers."

"By shopping around and getting a single additional mortgage rate quote, a borrower can save an average of $1,500," Khater said.

A new study by LendingTree [2] has also reached a similar conclusion.

The study [3], which looked at 300,000 loan offers on the LendingTree platform, found a wide distribution of mortgage fees offered to borrowers making the case for saving by shopping around evens stronger.

The study indicated that mortgage fees in the first quarter had a median of $2,059 for purchase loans and $1,807 for refinancing. However, the more offers a borrower received, the more they were likely to save on mortgage fees. In fact, for people receiving five offers, the media spread between the highest and lowest fees offered was $2,045.

As a result, the study found that 7% of purchase loan borrowers and 8% of refinance borrowers were offered $0 in fees. Furthermore, 15% of new purchase borrowers and 19% of refinance borrowers paid less than $500 in fees.

On average, 28% and 35% of the purchase and refinance borrowers respectively paid less than $1,000 in mortgage fees. On the high end, the study indicated that 13% of purchase borrowers had to pay fees of over $5,000, 3% over $10,000, and 0.21% over $20,000.

LendingTree said that many borrowers could also negotiate with the lender on their mortgage fees. However, the discounts, in this case, would only include aspects imposed by the government such as taxes, flood certification, city and county stamps, and recording fees.