Applying to Mortgage Lenders: How Many Are Necessary?

Applying to multiple mortgage lenders allows you to compare rates and fees to find the best deal. Having multiple offers in hand provides leverage when negotiating with individual lenders. However, applying with too many lenders may result in score-lowering credit inquiries, and it can trigger a deluge of unwanted calls and solicitations.

There is no magic number of applications. Some borrowers opt for two to three, while others use five or six offers to make a decision.

Reasons to Apply to Multiple Lenders

It's difficult to know you are getting the best deal if you have not compared it with other offers. With laws limiting how mortgage companies are compensated, there is less variance in rates and fees from company to company than there was in the past—during the 2000s, for example. However, subtle differences remain, and what looks like small interest rate savings now could translate to a large dollar amount over 15- or 30-year mortgages. Use a mortgage calculator to compare how different rates would impact your monthly payment.

Moreover, different lenders structure loans in different ways with regard to rates and closing costs, which carry an inverse relationship. Some lenders ramp up closing costs to buy down your interest rate, while others that advertise low or no closing costs offer higher interest rates in exchange.

Key Takeaways

  • Applying to multiple lenders allows borrowers to pit one lender against another to get a better rate or deal. 
  • Applying to multiple lenders lets you compare rates and fees, but it can impact your credit report and score due to multiple credit inquiries.
  • If you’re going to keep a mortgage for many years, it’s best to opt for a lower rate and higher closing costs. If you plan to refinance or pay off the loan after a few years, it’s best to keep closing costs low.
  • There is no optimal number of applications, though too few applications can result in missing out on the best deal, while too many might lower your credit score and besiege you with unwanted calls.

Looking at multiple good faith estimates (GFEs) side by side lets you compare rate and closing-cost scenarios to pick the best one for your situation. It generally makes sense to pay higher closing costs for a lower interest rate when you plan to keep the mortgage for many years because your interest rate savings eventually surpass the higher closing costs.

If you plan to sell or refinance after a few years, it is better to keep closing costs as low as possible because you are not paying off the mortgage long enough for interest rate savings to add up.

You can even play one lender against another when you have multiple offers. Suppose lender A offers you a 4% interest rate with $2,000 in closing costs. Then lender B comes along and offers 3.875% with the same closing costs. You can present lender B's offer to lender A and try to negotiate a better deal. Then, you can take lender A's new offer back to lender B and do the same thing, and so on.

If you are comparing lenders with each other, try to get an official loan estimate from each one that details all the terms, rates, fees, and points for each loan. When possible, try to compare loans with the same points. Lenders have been known to mislead borrowers with where they place their fees and points to make their deal seem better than a competitor's.

Drawbacks of Applying to Multiple Lenders

For a lender to approve your mortgage application and make an offer, it has to review your credit report. To do so, the lender makes credit inquiries with the three major credit bureaus.

Credit analysts note that too many inquiries can lower your numerical credit score. Hard inquiries in particular stay on your report for two years. Most scoring models, such as FICO and VantageScore, make inquiries into your credit account. These models are closely guarded, so few people know the exact extent to which inquiries matter. Fair Isaac Corporation (FICO), the creator of the FICO model, states that multiple mortgage inquiries that occur within 30 days of one another do not affect your FICO score.

In the current hot housing market, it is likely that borrowers will have to go through multiple rounds of credit checks as buyers get pre-approved, submit offers, and close on homes over several months instead of 30 days. Though multiple checks from mortgage companies over several months may be excluded by your lender for your housing purchase, it may lower your credit score for the following two years.

Another nefarious secret that many borrowers do not know is that credit bureaus make additional revenue by selling your information to mortgage lenders to which you have not applied. This is known in industry parlance as a trigger lead. Submitting a mortgage application triggers a credit pull, and mortgage companies pay the credit bureaus for lists of people whose credit was recently pulled by mortgage companies.

Knowing that these people seek mortgages, the companies' salespeople call down the list and pitch their services. The more lenders you apply with, the more likely it is that your information will be sold as a trigger lead, which can lead to a barrage of sales calls.

How Many Mortgage Pre-Approval Letters Should I Get?

You only need one mortgage pre-approval letter. If you've had a recent change in financial circumstances such as a raise or inheritance that changes your income, credit score, or down payment amount for the better, it may be worth getting a newer, stronger pre-approval letter.

How Many Times Can You Pull Credit for a Mortgage?

There is no real limit to how many times you can pull credit for a mortgage. Most borrowers have their credit pulled for pre-approval and again at closing to make sure it hasn't dropped. On occasion, lenders may pull credit again during the underwriting process if a long period of time has elapsed since your pre-approval or if they are verifying that you completed something such as paying off a debt, or if a dispute was removed.

Do Multiple Credit Inquiries From the Same Lender Count as One?

Generally, multiple inquiries made within 30 days are counted as one inquiry. If your lender pulls your credit multiple times outside of a 30-day period, it may count on your credit report as a hard inquiry.

Can I Lock Mortgage Rates With Multiple Lenders?

Technically, yes, but it is not a very courteous thing to do and you may be on the hook for costs such as credit-check and appraisal fees from each lender, depending on their policies. Originating and underwriting a loan takes a lot of time and care from several dedicated professionals. Locking rates with a lender implies that you are going through with the loan, which is how they get paid. If you cancel at the last minute, they have wasted their time and that company or lender may not be willing to work with you in the future.

Can I Shop for Rates Without a Hard Inquiry?

Yes. Many online lenders, local banks, and mortgage brokers list their rate charts transparently on their websites. If you prefer to call around, clarify in your phone call that you are only consenting to a soft credit check. Not everyone you speak with will be willing to give you rates over the phone, but there are many who will.

The Bottom Line

Too few applications can result in missing out on the best deal, while too many might lower your credit score and besiege you with unwanted calls. Unfortunately, there is no Goldilocks number that represents the right number of mortgage lenders to which you should apply. Some borrowers apply with only two, feeling certain that one or the other can provide the ideal loan, while others want to hear from five or six banks before making a decision.

Perhaps the best approach to getting a mortgage is to start by conducting market research to get an idea of what constitutes a great deal in the current lending climate. Next, contact two or three lenders and challenge them to match or beat the terms you have established. If you review their offers and still believe a better deal exists, apply to additional lenders as necessary but understand the established drawbacks of doing so.

Article Sources
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  1. Fair Isaac Corp. "Credit Checks: What Are Credit Inquiries and How Do They Affect Your FICO® Score?"

  2. Experian. "What Happens When Hard Inquiries Are Removed From Your Credit Report?"

  3. Consumer Data Industry Association. "Mortgage Triggers Briefing Paper."

  4. United Home Loans. "How Many Times Will You Pull My Credit?"