Report: Half of New Homebuyers Don't Shop Around for Mortgages

• January 14th 2015

by Lark Turner

The Consumer Financial Protection Bureau (CFPB) wants homebuyers to do a little more shopping around. Almost half of all buyers, or 47 percent, only seriously consider one mortgage lender when they buy a home, the agency said Tuesday while unveiling a set of tools aimed at homebuyer education.

“We are seeking to change the culture of how consumers go about obtaining mortgages in this country by making it more possible and more fruitful for them to shop around,” said Richard Cordray, the director of the CFPB, in remarks before the Brookings Institution given Tuesday.

Cordray said that given how carefully people look for a house, they should at least consider being more careful when looking for a lender.

“Consumers spend considerable time looking at different neighborhoods and at different homes for sale. The same should be true of choosing among possible mortgage loans,” he said. “When you are spending a lot of money, you are literally betting the house on the choices you are making, and it can be highly beneficial to shop around.”

Homebuyers also probably place too much faith in lenders with a vested interest in securing a sale, Cordray said. In the same agency survey, 70 percent of people said they relied “a lot” on their broker or lender, while just 20 percent said they looked at websites. A mere 2 percent were dependent on advice from housing counselors.

And the difference could mean a lot of money, he said, given fluctuations rising to as much as half a percentage point from lender to lender. On a $200,000 fixed-rate 30-year loan, an interest rate of 4 instead of 4.5 percent would save a consumer $60 a month, Cordray said.

“In addition, the lower interest rate means that the borrower would pay off an additional $1,400 in principal in the first five years, even while making lower payments,” he said. “By not shopping around, consumers often are throwing good money down the drain.”

The agency also found that the more confident buyers were in their knowledge about getting a mortgage, the more likely they were to shop around among lenders. Buyers familiar with interest rates were especially likely to shop.

This article originally published at https://dc.urbanturf.com/articles/blog/cfpb_half_new_homebuyers_dont_shop_around_for_mortgages/9403.