The average homebuyer spends countless hours online looking at listings, views more than four homes, attends approximately two open houses and typically makes two offers on a home. However, according to a recent Zillow analysis, one of the most important things they overlook when shopping around is trying to find the best mortgage rate.
Many buyers settle on the first rate that they’re offered. However, this could be a mistake that could cost thousands of dollars over the several years spent living in the home. Homebuyers with less than stellar credit scores, in particular, stand to benefit the most from shopping around for a mortgage.
The median rate for a 30-year fixed-rate mortgage offered to those with credit scores of 760 or higher—considered excellent and low-risk—was 4.54 percent, according to Zillow. For those with credit scores in the 620-639 range, the median rate was 5.48 percent—a difference of nearly a full percentage point.
"Finding the right home and neighborhood, and agonizing over how much you can actually afford to bid, can be so overwhelming that optimizing the nuts and bolts of your mortgage, admittedly the driest and arguably the murkiest part of the process, can be overlooked at a big eventual cost," says Skylar Olsen, director of Economic Research at Zillow.
Below is a partial list of cities compiled by Zillow that shows the typical savings a homebuyer could expect to see based on whether or not their credit score is above or below 680:
For Zillow’s full list and a breakdown of the company’s methodology, click here.