The average American consumer may be putting more thought into what to eat for dinner than what to do when it comes time to shop for a mortgage, a new government study shows.
A 2014 report from the Consumer Financial Protection Bureau released on Jan. 13, 2015, found that more than half of homebuyers don’t shop around before getting a mortgage. The study also found those same buyers rely heavily on the advice of people who are vested in their decision, such as real estate agents and mortgage officers.
“They routinely weigh the most basic questions about which house to buy, such as where they want to live, and how many bedrooms or bathrooms they think they will need,” the CFPB said in a release. “But they do not seem to be as careful or as confident in weighing the economic aspects of the mortgage decision, such as what down payment they can afford or what mortgage terms fit their unique financial needs.”
The report, based on results from new data in the National Survey of Mortgage Borrowers, found that 3 out of 4 consumers only apply for a mortgage with one lender or broker.
Less than 24 percent of homebuyers submit more than one application for a mortgage, which means many could be paying more interest than they otherwise might.
A consumer taking out a 30-year mortgage for $200,000 and paying an interest rate of 4.5 percent will pay about $60 per month more than someone borrowing at 4 percent, and the borrower with the cheaper loan will also build equity faster, the report said.
"Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating," said CFPB Director Richard Cordray, who is announcing a "know before you owe" information initiative designed to help consumers navigate the still-complex mortgage market. "Consumers will be able to gain greater control over the outcomes of the mortgage process and maximize the benefits of this major transaction.”
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