Mortgage Borrowers May Be Leaving Money on the Table by Using Less Effective Mortgage Shopping Strategies
A new study from Fannie Mae finds that many Americans do not adequately investigate or fail to understand fully the choices available to them when shopping for a mortgage.
Washington, D.C.—A new study from Fannie Mae finds that many Americans do not adequately investigate or fail to understand fully the choices available to them when shopping for a mortgage. This behavior may increase both cost to the borrower and the potential for problems to arise during the life of the loan. Data from the November National Housing Survey Topic Analysis Report suggest that consumers could save money and find a more financially sustainable mortgage product if they shopped more effectively.
To better understand homebuyer trends, the study examines how consumers across different demographic groups, including various income levels, undertake the mortgage shopping process. While most consumers do undertake some form of shopping around for their mortgage, data indicate that nearly half of all lower income mortgage borrowers say they obtained only one quote when shopping for their current mortgage. Recent research indicates that this practice may cost borrowers $1,000 or more in closing costs.
According to National Housing Survey data, when choosing a mortgage lender, more than three out of four higher income respondents said that competitive offers would have a major influence on their choice, which is more than 20 percentage points higher than lower income respondents. Data also show that higher income respondents are more comfortable using technology such as mobile devices and online research in the mortgage shopping process. However, across all income groups, consumers are less comfortable obtaining mortgage quotes or the mortgage itself using a mobile device. Survey results also find that a substantial portion of all consumers do not understand key mortgage elements. When asked to estimate the maximum percentage by which the monthly adjustable-rate mortgage (ARM) payment can increase over the life of the loan, 41 percent of respondents were unable to answer.