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LendingTree Reveals the Cities Where Borrowers Save the Most by Shopping Around for Mortgage Loans

If you are buying a home in San Francisco, taking the first mortgage offer you receive without shopping around could cost you over $44,000 in interest over the life of your loan. In Memphis, Tenn., it could cost you over $21,500.

As interest rates change, so too can the amount of money consumers save by shopping around and comparing offers. To help consumers understand how much they can save, LendingTree created a Mortgage Rate Competition Index, which measures the basis point spread between high and low APRs offered to users through the LendingTree marketplace.

We used that index to analyze the difference in rates and potential savings for mortgage shoppers in the 50 largest cities in the United States. This is a more detailed view of the national data we crunch every week in our Mortgage Comparison Shopping Report.

What our study indicates is that by using LendingTree to shop around for a mortgage, the average American can save over $31,000 over the lifetime of their loan.

Key findings

Comparing mortgage offers before buying saves homebuyers the most money in California. Savvy shoppers can save over $44,000 in San Francisco, the most of any city in our study. The savings are comparable in San Diego, but slightly smaller, at about $43,000.

Shoppers in Denver can save more than those in Los Angeles and New York. The average buyer can save $42,123 if they shop around in Denver, good for No. 3 on our list. This is higher than the potential savings for buyers in places like Seattle, Los Angeles and New York.

The average buyer can save almost $90 a month when they shop around for a mortgage loan. On the highest end of the spectrum, buyers in San Francisco can save nearly $124 a month. On lowest end of the spectrum, buyers in Memphis, Tenn., can still save $60 a month if they shop around.

Even less expensive cities register meaningful savings. In Oklahoma City, a low median home price of $180,000 and a spread of 64 basis points adds up to over $24,000 in savings over the lifetime of a loan.

There are significant savings for purchase borrowers in every city. The range between the highest and lowest offers varies between 50 basis points in New Orleans to 75 basis points in Albuquerque, N.M. This translates to about $24,000 in savings in New Orleans to over $40,000 in Albuquerque.

Individual borrower results will vary. Our method uses median values, so half of borrowers would see smaller savings. But, just as important, half could see larger savings. There is no way for a borrower to know where they fall in this spectrum without shopping around, so it is imperative to compare offers.

Cities where purchase borrowers face the largest differences in mortgage rates

Albuquerque, N.M.

Mortgage Rate Competition Index: 0.75

Median home loan amount: $255,000

Monthly payment savings: $113

Annual payment savings: $1,357

Lifetime interest savings: $40,271

Louisville, Ky.

Mortgage Rate Competition Index: 0.71

Median home loan amount: $227,500

Monthly payment savings: $95

Annual payment savings: $1,141

Lifetime interest savings: $33,865

San Antonio

Mortgage Rate Competition Index: 0.69

Median home loan amount: $202,500

Monthly payment savings: $82

Annual payment savings: $987

Lifetime interest savings: $29,290

Cities where purchase borrowers could save the most in lifetime interest payments

San Francisco

Lifetime interest savings: $44,028

Median home loan amount: $332,500

Monthly payment savings: $124

Annual payment savings: $1,484

Mortgage Rate Competition Index: 0.63

San Diego

Lifetime interest savings: $42,780

Median home loan amount: $297,500

Monthly payment savings: $120

Annual payment savings: $1,441

Mortgage Rate Competition Index: 0.68

Denver

Lifetime interest savings: $42,123

Median home loan amount: $292,500

Monthly payment savings: $118

Annual payment savings: $1,419

Mortgage Rate Competition Index: 0.68

Cities where refinance borrowers face the largest differences in mortgage rates

Louisville, Ky.

Mortgage Rate Competition Index: 0.94

Median home loan amount: $210,002

Monthly payment savings: $117

Annual payment savings:  $1,409

Lifetime interest savings: $41,818

Indianapolis

Mortgage Rate Competition Index: 0.92

Median home loan amount: $190,002

Monthly payment savings: $104

Annual payment savings: $1,243

Lifetime interest savings: $36,874

Greensboro, N.C.

Mortgage Rate Competition Index: 0.91

Median home loan amount: $210,002

Monthly payment savings: $114

Annual payment savings: $1,364

Lifetime interest savings: $40,468

Cities where refinance borrowers could save the most in interest over the life of a loan

San Francisco

Lifetime interest savings: $54,442

Median home loan amount: $325,001

Monthly payment savings: $153

Annual payment savings: $1,834

Mortgage Rate Competition Index: 0.79

Los Angeles

Lifetime interest savings: $50,919

Median home loan amount: $300,001

Monthly payment savings: $143

Annual payment savings: $1,716

Mortgage Rate Competition Index: 0.81

San Diego

Lifetime interest savings: $50,855

Median home loan amount: $300,001

Monthly payment savings: $143

Annual payment savings: $1,714

Mortgage Rate Competition Index: 0.80


What is the Mortgage Rate Competition Index?

The LendingTree Mortgage Rate Competition Index is a proprietary measure of the dispersion in mortgage pricing. It measures the spread in the APR of the best offers available on LendingTree relative to the least competitive (i.e., the highest) rates. Our research shows that mortgage rate competition varies with the financial and operational measures of activity in the mortgage markets. More details on the index are available in a white paper on the LendingTree website.

How is the index formulated?

A mortgage shopper enters their information on LendingTree.com. They input loan variables including the proposed amount and down payment, property variables including property type and location, and personal information including income. LendingTree transmits this data, including a soft credit inquiry, to lenders who evaluate the borrower against their lending parameters in their pricing engines. Interested lenders return a rate and fee offer. For our index, we combine the rate and fees into an APR and calculate the spread as follows:

The spread is the difference between the highest and lowest offers. In this example, 4.62-4.21 = 0.41. We repeat this calculation across 30-year fixed-rate loans and then find the median of the individual spread, which is our index value. This is done separately for the population of purchase and refinance loan requests.

For the purposes of this study, use data on the CSA and MSA levels to approximate data on a city level.

 


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