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- Comparison-shop with at least three mortgage lenders. These might include a bank or credit union or an online provider.
- Get mortgage rate quotes within a 45-day window to minimize the impact to your credit score.
- While it's best to shop around with multiple lenders, you only need one preapproval to make offers on homes, and only need to lock in your rate and apply with one lender.
Should you apply for a mortgage with multiple lenders?
When applying for a mortgage, it’s best to compare at least three lenders, according to the Consumer Financial Protection Bureau (CFPB). This can help you uncover the ideal combination of loan type, interest rate and fees that meets your needs.
How to apply with multiple lenders
Whether you’re buying a home or refinancing, there’s some prep work involved when it comes to applying for a mortgage with more than one lender. Follow these steps:
1. Check out current mortgage rates
Do as much research as possible ahead of getting rate quotes or applying for a mortgage. There’s plenty of information out there about current mortgage rates and APRs. Knowing the landscape can help you get a feel for what to expect when you’re ready to get preapproved.
While your individual rate will largely be determined by your credit score, this step offers perspective on what rates are like today, and helps you compare fees between lenders without having to go through the application process.
2. Choose your lenders
While there’s no right number of mortgage lenders to get quotes from, the CFPB suggests contacting at least three. Having done your research beforehand, you’ll be able to make a more informed decision as to which three (or more) you’d be comfortable working with.
Keep in mind: While it’s tempting to go with your current bank for your mortgage, there are many types of lenders, including other banks, savings and loans associations, credit unions and online lenders.
“Find a mortgage originator you like and trust, and stick with them,” says Mike Carpenter, a senior mortgage loan originator at Kirkland, Washington-based Washington First Mortgage Loan Corp.
3. Understand all application costs
Some mortgage lenders charge an application fee when you apply for a loan, which can run up to several hundred dollars and is usually non-refundable. If your goal in applying for multiple mortgages is to save money, then it might not make sense to spend on applications with several lenders.
If a lender does have a fee and you’re set on applying for a loan, ask if it can be waived or reduced. The lender might be open to negotiating with you.
“While most lenders won’t tell you an application fee is negotiable, it does tend to be one of the few costs associated with obtaining a mortgage that can be flexible, or waived,” says Lauren Anastasio, a senior certified financial planner with Vanguard.
Note: The application fee might be called something other than “application fee.” Others might waive the application fee but impose a higher origination or underwriting fee.
Beware of “junk” fees, as well, which are added costs lenders might tack on. For example, you might find two line items on your loan estimate that cover the same thing, such as an “origination” and “broker” fee. If you spot this, ask for clarification.
Here are a few other possible junk fees to watch for:
- Processing fee
- Document preparation fee
- Administrative fee
- Email fees
- Miscellaneous fee
Of course, there are several legitimate costs commonly associated with getting a mortgage, including charges for an appraisal, credit check and title services. It’s important to understand all of these fees ahead of time so you know exactly how much the loan costs, and potentially have some leverage negotiating with lenders.
4. Gather documents for your application
When you apply for a mortgage, you’ll provide the lender with information about your employment history, income and any assets and debt you have. Before you get quotes or apply for multiple loans, gather this paperwork, including pay stubs and W-2s. (Here’s a comprehensive list.) If you’re self-employed, you’ll need to provide documents related to your business, as well.
In addition, consider creating a separate email account. When you apply for multiple mortgages, you might get bombarded with sales pitches, follow-up emails, calls and texts. With a dedicated inbox, these communications can land there instead of your usual account.
5. Get preapproved or prequalified
If you don’t want to pay application fees (or go through with your applications just yet), you can get preapproved or prequalified for loans instead, typically at no charge.
A mortgage prequalification is a basic assessment of your credit and finances and gives you an idea of what you might qualify for. A preapproval is a more thorough evaluation and involves submitting documentation about your financial situation. A preapproval letter allows you to make offers on homes; a prequalification does not.
Will multiple mortgage applications affect my credit score?
When you apply for a mortgage, the lender pulls your credit report to help in its decision to approve or deny your loan. This is considered a “hard” credit check, which can lower your credit score — temporarily, at least. Several hard inquiries within a short time frame might make a bigger dent in your score.
However, credit scoring models take mortgage rate-shopping into account and group multiple inquiries together as one if these checks all take place within a 45-day period. These credit pulls typically stay on your credit report for two years before dropping off.
“There will be a record of multiple credit inquiries if you do apply with multiple lenders, but there should be little to no impact on your credit score from those inquiries and it shouldn’t discourage you from speaking with multiple lenders until you find the right fit,” Anastasio says.
One tactic you could try to avoid dinging your credit too much is to get your free credit report from each of the three major credit bureaus, determine the middle score and submit that when you look to get preapproved. You can request your reports through AnnualCreditReport.com.
FAQ about applying for a mortgage
While you can technically lock your rate in with multiple lenders, doing so implies you’re following through with the loan application process. Locking your rate could also trigger a credit check and sometimes other fees, which you might still be responsible for even if you decide to do business with another lender. For these reasons, it’s best to shop for rates with multiple lenders, but only lock your rate with the one waving the most compelling offer.
While it’s a good idea to rate-shop with at least three lenders, you only need one preapproval letter to make an offer on a home.
You’ll apply for a mortgage once a seller accepts your offer for their home and both parties sign the purchase agreement. Before you begin searching for homes and making offers, you’ll need to obtain a preapproval for the mortgage. The preapproval process is very similar to the application process, and much of the information you provide for a preapproval transfers to your application when the time comes. Get preapproved when you’re ready to search for homes. Typically, a preapproval remains valid anywhere from 30 days to 90 days. If you haven’t found a home by that time, you might need to ask your lender to issue a new preapproval letter.