WASHINGTON—A new study reveals that almost half of consumers do not shop for a mortgage when purchasing a home.
The report, from the Consumer Financial Protection Bureau, also indicates that informed consumers are more likely to shop, especially if they are familiar with available mortgage rates.
“Our study found that many consumers are not shopping for a mortgage. Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating,” said CFPB Director Richard Cordray.
As a result, the agency—as part of its Know Before You Owe mortgage initiative—is releasing “Owning a Home,” an interactive, online toolkit designed to help consumers as they shop for a mortgage. The suite of tools “gives consumers the information and confidence they need to get the best deal,” the CFPB stated in a release. “It takes the consumer from the very start of the home-buying process, with a guide to loan options, terminology, and costs, through to the closing table with a closing checklist.”
“The Know Before You Owe Owning a Home toolkit makes it easy to see how shopping for a mortgage can translate into big dollars saved in the long run. We want to enable consumers to be more savvy shoppers,” Cordray added.
The CFPB’s study is based on results from new data in the National Survey of Mortgage Borrowers, a voluntary survey jointly conducted by the CFPB and the Federal Housing Finance Agency. The Bureau analyzed responses from consumers who took out a mortgage to buy a home in 2013.
Among the key findings:
- Almost half of consumers who take out a mortgage fail to shop prior to filling out an application for a mortgage.
- Three out of four consumers only apply with one lender or broker: While half of consumers shop around to see who advertises lower rates, fewer than one out of four borrowers actually end up submitting a loan application to more than one lender or broker, the study found.
- Most consumers get their information from lenders or brokers, who have a stake in the outcome: The survey asked recent mortgage borrowers whether they used different information sources. Respondents were asked to report whether they used each source a lot, a little, or not at all. Consumers could pick multiple categories. Among the findings: 70% of consumers report relying on their lender or mortgage broker a lot to get information about mortgages.
- Borrowers who prioritize the terms of the loan over the characteristics of the lender are more likely to shop: The survey asked borrowers whether characteristics of lenders or mortgage brokers were “very,” “somewhat,” or “not at all” important in their selection. The survey found those who listed lender characteristics as important, instead of the loan terms, are less likely to shop. Specifically, the survey found that among all borrowers – those who shopped and those who did not – 42% said having an established banking relationship with the lender is “very important.”
- Consumers who are confident in their knowledge about the mortgage process are more likely to shop around. “For example, consumers who are confident about their knowledge of available interest rates are almost twice as likely to shop as consumers who are unfamiliar with available interest rates,” the CFPB stated. The survey found that 55% of shoppers said they were very familiar with mortgage rates, while 30% of shoppers said they were not at all familiar.
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