A deep dive into a recently expanded dataset mortgage lenders must provide to regulators confirms that it pays to shop around for the best rate — particularly for borrowers seeking jumbo, FHA or VA loans.

Across all types of loans, the disparity in annual percentage rate (APR) among top lenders tended to hover around half a percentage point, researchers at the Consumer Financial Protection Bureau found. That means a homebuyer taking out a $300,000 loan with a 7 percent rate instead of 6.5 percent could end up overpaying by $1,200 a year.

But there was even greater price dispersion among the biggest lenders offering government-backed FHA and VA loans.

After adjusting for factors like credit score and combined loan-to-value (LTV) ratios, the rate disparity among the top 20 FHA lenders was 61 basis points. At 64 basis points, the rate spread among top VA lenders was the widest of all.

One basis point equals one hundredth of a percentage point, so a 64-basis point spread means that if the lowest rate offered was 6.5 percent, the highest rate offered would have been 7.14 percent.

The rate spread among the top 20 lenders offering conventional mortgages eligible for purchase or guarantee by Fannie Mae or Freddie Mac was considerably smaller, at around 41 basis points.

At 57 basis points, price dispersion among the top 20 providers of jumbo loans exceeding Fannie and Freddie’s loan limits was nearly as great as FHA and VA loans.

Expanded HMDA reporting provides new insights
Past studies have also highlighted the importance of shopping for the best rate. In February, researchers at Freddie Mac found that the disparity in rates offered by lenders doubled last year.

Today, lenders must not only report APR but credit score, combined LTV and debt-to-income (DTI) ratios, making it easier to compare loans apples-to-apples for all originators.

Lenders are not the same. Some retain servicing, some market themselves on speed and ease of closing transactions, and some have physical branches near consumers.

For some borrowers, it is possible that these factors might outweigh the price differences – just like in retail a consumer might want to shop at the closest store or the cleanest store or a store that offers the same product for less, even if lacking other desirable attributes.

According to a recent Fannie Mae analysis of eight years of consumer survey data, about one-third of prospective homebuyers only get a quote from one lender — a number that’s hardly changed over time.

Credit bureaus won’t ding your credit score if you do your rate shopping within a focused period of 30-45 days, and many mortgage comparison sites promise to help take the work out of shopping for the best rate.

But the CFPB warned the operators of such sites in February that they may be violating the law if they’re paid to steer consumers to a particular lender, “rather than basing their rankings on neutral criteria like the interest rates and fees charged by the lender.”

After finding the right lender, the CFPB also advises borrowers that they can save additional money by comparing costs for obtaining title insurance and settlement services.

Call us at (480) 205 2234 to help you with all this and get the best rates that suit your needs.