Key Takeaways: 

• Nearly 7 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.

Home shoppers spend months searching for the right home, but most gather quotes from only one mortgage lender. That seemingly small decision can be a missed opportunity that costs buyers tens of thousands of dollars over the life of a loan.

While affordability recently reached a three-year best thanks in part to lower mortgage rates and record-high discounts from home sellers, it remains stretched for many. Today’s home buyers need every advantage they can get, and comparing lenders is an effective tool that’s often overlooked. Despite typically investing months in their home search, nearly 7 in 10 mortgage shoppers submit only one application, according to Zillow’s Consumer Housing Trends Report. 

Even a small difference in mortgage rate can make a meaningful difference that opens the door to more homes today and continues paying off for years to come. On a typical U.S. home worth about $360,000, a buyer paying 6.24% — the average 30-year fixed rate in November — would owe about $2,345 each month. ¹ At 5.74% — within the typical range for shoppers who compare multiple offers — the payment drops to $2,253, saving roughly $1,100 a year. In November, that savings would have been enough to make 22,000 more homes nationwide affordable to a median-income household.

These differences only grow in higher-cost markets. In San Jose, landing the lower rate would save a buyer about $4,750 a year, and annual savings would exceed $2,000 in six other expensive metros. When looking at homes on the market in November, the potential savings from rate shopping would bring more than 1,200 additional listings within a typical buyer’s budget ² in Dallas, the most in the country. 

Lenders weigh credit profiles, loan types and market conditions differently, meaning the same borrower can receive materially different offers. In a 2019 analysis, Zillow found spreads of from 90 to 130 basis points between the best and worst quotes for borrowers, depending on their credit profile. A more recent analysis from Freddie Mac showed home buyers can see rates move 50 basis points in either direction when receiving quotes from different lenders. 

While lower rates mean saving on a mortgage payment each month, a loan with a lower rate may not automatically be the best option for each buyer. One factor to consider is that loan offers with lower rates often come with different terms for things like down payment requirements and closing costs. Home shoppers should consider the full picture of each loan offer in their decision making. 

[1] Assuming a 20% down payment. Principal and interest only.
[2] For the purposes of this analysis, a home is considered affordable if the monthly payments would take up no more than 30% of a median income.