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Key takeaways
- Comparison-shop with at least three mortgage lenders. Candidates might include a bank or credit union or an online provider.
- Get mortgage rate quotes within 45 days 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.
How many lenders should I apply to for a mortgage?
When applying for a mortgage, it’s best to compare at least three lenders, according to the Consumer Financial Protection Bureau (CFPB). Doing so can help you uncover the ideal combination of loan type, interest rate and fees that meets your needs.
Comparison-shopping pays off financially, as well. In fact, applying with multiple mortgage lenders helps you save money — as much as $1,200 a year, according to Freddie Mac research.
How to apply for a mortgage 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:
Step 1. Compare 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. Compare rates from multiple lenders as well as for different mortgage types to get an idea of what might be the best option for you. By getting a feel for the financing landscape, you’ll know 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 interest rates are like today, and helps you compare fees between lenders without having to go through the application process.
Learn more: How to get the best mortgage rate
Step 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 financial institution for your mortgage, there are many types of lenders, including 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.
You can use Bankrate’s best mortgage lender guide to help you narrow down your choices.
Learn more: Mortgage lender reviews
Step 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 blow a bundle on applications.
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.
Bankrate insights
Note: The application fee might be called something other than “application fee.” Also, some lenders 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 a “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 fee
- 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.
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Step 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 of documents needed for preapproval.) 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.
Step 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 finances. A preapproval letter allows you to make offers on homes; a prequalification does not.
Learn more: Prequalified vs. preapproved: What’s the difference?
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. The check stays on your credit report for two years.
In general, 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. Figuring that you’re only going to get one mortgage and live in a single home, they group multiple inquiries together as one — provided these pulls all take place within a 45-day period.
“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,” says Anastasio.
3-to-1
While you might apply to as many as three lenders, lock in a rate with only one, as doing so implies acceptance of an offer.
Advice for applying to multiple mortgage lenders
When considering multiple mortgage lenders, take your time and shop around. Applying to several lenders could save you a considerable amount over the life of your loan. You might also consider letting lenders know you’re comparing offers since this could encourage them to give you their best deal upfront. Ask lenders to provide you with loan estimates so you can easily compare offers and rates.
When comparing offers, evaluate the lender’s service and its offered rate; a slightly higher rate might be worth it if the lender can close on time and offers superior service. Finally, protect yourself against spam by being selective with your applications to lower the likelihood of your details being passed to other financial institutions.
FAQ about applying for a mortgage
In general, it’s a good idea to apply to multiple mortgage lenders, but there are a few possible drawbacks. If you apply to multiple lenders outside of a 45-day period, the subsequent credit checks might not be treated as one. That can result in multiple dings to your credit score.
Each application will require extra time, preparing and mailing or uploading multiple documents. And if each lender has non-refundable application fees, you could be out of hundreds of dollars. So, while you can research as many lenders as you like, keep the actual applications to three maximum.
While you can technically lock your rate in with multiple lenders, doing so implies you’re committing to the loan underwriting process with that lender. 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 work with another lender. For these reasons, it’s best to shop for rates with multiple lenders, and even apply to several. But only lock your rate with the one waving the most compelling offer.
You’ll apply for an actual mortgage once a seller accepts your offer for their home. Before you begin searching for homes and making offers, you’ll need to obtain a mortgage preapproval. The preapproval process is very similar to the application process, and much of the information you provide for a preapproval transfers to your formal mortgage application when the time comes. Typically, a preapproval remains valid anywhere from 30 days to 90 days, so you should be in major house-hunting mode once you get it. If you haven’t found a home by the period’s end, you might need to ask your lender to issue a new preapproval letter.
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.
Additional reporting by Emma Woodward
