A new report by Zillow, courtesy of Yahoo Finance, took a look at how many American consumers may have needlessly wasted money on mortgage payments by not checking their options before committing.
Not everybody loves shopping, especially if one refers to “shopping around” for the best deals, the best interest rates, and the like. And that as much was proved by a recent Consumer Financial Protection Bureau (CFPB) report, where the federal watchdog group revealed that almost half of all consumers do not look for the best mortgage deal before committing to one.
To be exact, the CFPB surveyed 5,000 consumers who took out a mortgage in 2013, and among those respondents, 47 percent said that they do not do any form of mortgage shopping while deciding where to apply – this means they only took one lender into consideration, without checking the alternatives. 77 percent said that their applications were done with only one institution. This is major as the variance between interest rates for 30-year fixed-rate mortgage products could go as high as half a percentage point (50 basis points) for any two given lenders.
The report talked about how mortgage rate gyrations are twice as volatile as they used to be. Before the 2008 recession gutted the world’s economies, including the U.S. housing market, it was considered fickle for rates to fluctuate by .125 percent (12.5 basis points) up or down per week. But in the current economic and mortgage climate, rates can go up or down by as many as 25 basis points, or .25 percent/one-fourth of a percentage point.
The financial company advised consumers to “get quotes from all lenders on the same day,” and to get the quotes prior to each home offer when buying a home. “You’ll do this until a seller accepts your offer, at which time you must select a lender,” the blog post continued. “If you’re refinancing, you’ll compare lenders’ quotes each day until you lock a rate with one of them.”
When it comes to ascertaining whether a quote is accurate or not, Zillow told consumers that rates and closing costs are inversely proportional to each other – in other words, rates go down as closing costs go up, while low closing costs traditionally means higher rates. It is also very important for consumers to ensure that they are comparing rates with fees and annual percentage rates figured in.
On the topic of rate locks, Zillow stressed that this should be done for one specific property, and that consumers cannot lock rates in until they are in contract to make the purchase. Other factors mentioned include whether lenders are able to “perform on time” with regards to specific stages of the home buying process.
Regarding rate locks, there are no hard, fast rules, but lenders typically offer consumers one-half of a mortgage rate market decline if a locked rate has to be negotiated. As for refinances, Zillow said that the process would still be the same for consumers – get complete, same-day quotes, compare interest rates and other factors, and weigh everything completely before making a decision.