Many consumers still aren’t shopping around for a cheaper mortgage

A significant portion of consumers, 36%, receive only one mortgage quote when looking for a loan, with new applicants and repeat applicants showing similar behavior, Fannie Mae said.

Moreover, the results of the study from the first quarter of this year are in line with other research conducted in 2014 and 2019, which means that the behavior has not changed in the seven years since the introduction of the form. loan estimate by the Consumer Financial Protection Bureau that made it easier for consumers to comparison store lenders.

A separate study by Zillow Home Loans actually puts the situation in a worse light, claiming that 72% of potential home buyers haven’t shopped around — nor are they planning to — for a mortgage that best suits their needs. financial situation.

Soaring mortgage rates are increasing the need for consumers to shop around for multiple quotes. Even though rates fell 47 basis points to an average of 6.61% in this week’s Freddie Mac Mortgage Primary Market Survey, they are still 3.5 percentage points above their year-ago average of 3.1%. It was during the first quarter, the period during which Fannie Mae conducted its survey, that mortgage rates began to climb, ending the period at 4.67%.

The top reason cited in Fannie Mae’s first quarter national housing survey by recent buyers who only received one quote was that they felt most comfortable with the lender they had. received the quote, at 39%. The second most frequently cited reason was satisfaction with the first quote received, cited by 29%.

These reasons were also the top reasons cited in the Q1 2019 and Q1 2014 polls, a blog post by John Thibaudeau of Fannie Mae, Vice President, Single-Family Real Estate Asset Management; and Rachel Zimmerman, market research consultant, head of the National Housing Survey.

“Feeling comfortable with a lender or ‘satisfied’ with a first mortgage submission could be construed as taking the ‘easy’ route, as it requires less time investment and critical thinking when a process that many people already find complex and stressful,” Thibaudeau and Zimmermann said.

“Homebuyers, especially first-time homebuyers, can feel overwhelmed by the complexity of comparing the many components that make up mortgage costs, including interest rate, closing costs and the points between different mortgage offers.”

The reasons why a repeat homebuyer might only get one mortgage quote are different. Some feel they got the best deal from a lender they trust, or that they might be less price sensitive, Thibadudeau and Zimmerman theorized, adding that more behavioral research needs to be done.

Also, fewer consumers are negotiating with their originator to see if they can get a lower rate compared to three years ago. Only 33% of recent buyers surveyed in the first quarter said they had tried to negotiate to reduce their rate offer, compared to 40% in the 2019 survey, Fannie Mae said.

“The decrease in negotiations may be due to the historically low mortgage rate environment and home buyers being very competitive in the housing market when buying homes in 2021,” Thibaudeau and Zimmerman said. “It could also indicate that some consumers are unaware that they have the ability to bargain.”

Meanwhile, more than 90% of buyers did not purchase title and settlement services after receiving their lender’s closing cost estimate, Fannie Mae found.

The Zillow survey said the number one reason many consumers don’t shop is because they’re worried about the impact on their credit score, with nearly 30% believing submitting multiple inquiries would hurt.

Just under a quarter of respondents, or 24%, said they were satisfied with the first lender they contacted. 19% said it took too much time and effort; 15% believe that all mortgage lenders offer the same rates; 14% were embarrassed to share their financial information with lenders; and 8% of responses were categorized as other. Respondents could cite more than one reason.

Almost half, or 46%, of potential buyers seeking pre-approval only applied to one lender.

Meanwhile, 28% of potential buyers spent at least a month researching vehicles for their next car purchase, but only 13% said they spent that much time researching mortgage lenders before applying, Zillow said. . Before booking their vacation, 23% spent a month researching, while 12% took the same amount of time to figure out which TV they would buy.

The survey was conducted online by The Harris Poll on behalf of Zillow Home Loans between August 29 and August 31 and included data from 3,082 American adults aged 18 and older, of whom 1,104 were considering buying a house within the next two years. .

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