Close to half of all consumers don’t look around for a mortgage when looking to buy a home, according to a new survey released by the Consumer Financial Protection Bureau and the Federal Housing Finance Agency.
The National Survey of Mortgage Borrowers, which was conducted as part of the CFPB’s Know Before You Owe initiative, also revealed that 70 percent of consumers get mortgage information from brokers or financial institutions, instead of third parties who do not have any bearing on the outcome of the mortgage application. With almost half of respondents seemingly reticent to do mortgage shopping, the CFPB launched a new online suite called “Owning a Home” that is designed to educate consumers, and remove any trepidation they have when it comes to looking for the best mortgage arrangement.
“Our study found that many consumers are not shopping for a mortgage,” read the official CFPB statement from director Richard Cordray. “Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating. 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.”
Further, the CFPB and FHFA’s joint study revealed that while most risky features included in mortgage products have been removed following the global economic crisis of the late 2000s, many consumers still find the terms and features of existing mortgage products to be ambiguous or intimidating. Features like the loan term/life of loan, loan type, and interest rate remain befuddling to potential home buyers, which makes comparison shopping quite the task.
About 75 percent of all consumers surveyed said that they apply with only one lender or broker, which the CFPB believes is a sign that consumers truly do not have enough initiative to make comparisons and weigh multiple options before going with the arrangement that suits them the best.
It would stand to reason that consumers who are conversant with the mortgage process in general are more willing to do comparison shopping, and that is exactly what the CFPB/FHFA study revealed – those familiar with mortgage application do shop around more. Still, the main takeaway was still the fact that many consumers included in the survey do not feel empowered or confident enough to consider more than one lender or broker.
That would be where the CFPB’s new online tools come in. The Rate Checker, for instance, educates consumers on the interest rates they can qualify for, and makes use of the same variables used by lenders when checking this data for borrowers. Data is updated every day and culls information from national and regional banks, as well as non-bank financial institutions such as credit unions. All told, 80 percent of the entire mortgage market is covered by this particular tool. Consumers can access the Rate Checker and other Owning a Home tools on the CFPB official website.
At a keynote speech at the Brookings Institution, Cordray said in prepared remarks that consumers need not worry about their FICO credit score when comparison shopping – it will not be affected by this. “Within a certain window of time – generally between 14 and 45 days – multiple credit checks from mortgage lenders or brokers are treated as a single inquiry,” he said. “…You can shop around and even submit multiple applications to obtain multiple initial estimates. The effect on your credit will be the same no matter how many lenders you consult.”