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.
“Homeowners who don’t obtain multiple mortgage offers or carefully compare rates are essentially leaving money on the table, particularly given today’s unprecedentedly low interest rates,” says Fannie Mae Chief Economist Doug Duncan. “Although a home purchase is the largest financial obligation most people will ever make, many borrowers do not fully understand their mortgage products and costs. As a result, some homeowners in this position may find themselves with unsustainable payments down the road.”
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 3 out of 4 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.
For more detailed findings from the November National Housing Survey Topic Analysis Report, click here.
For more information, visit www.fanniemae.com.