A Fannie Mae study finds that many Americans don’t adequately investigate or fail to understand the choices available when shopping for a mortgage. That, in turn, can increase cost to the borrower and add problems that arise during the life of the loan.
“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.”
The study examined how consumers across different demographic groups and income levels shop for a mortgage. While most consumers shop around for a mortgage, nearly half of all lower-income borrowers said 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.
When choosing a lender, more than 75 percent of higher-income respondents said that competitive offers would have a major influence on their choice – more than 20 percentage points higher than lower income respondents. Higher-income respondents are also more comfortable using technology, such as mobile devices and online research, when shopping for a mortgage.
However, across all income groups, consumers are less comfortable obtaining mortgage quotes or the mortgage itself using a mobile device.
Survey results also indicate that most consumers don’t 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.
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