When it comes to getting the best deal on what is most consumers’ biggest purchase and borrowing decision, nearly half of us don’t even shop around, according to a report released Tuesday by the Consumer Financial Protection Bureau. And that could be costing you money,
Three-quarters of all home buyers only apply to one lender, the bureau found. Not shopping around could have a significant impact on whether consumers are getting the best loans with the best terms or paying more than they have to, the agency said.
Consumers who are more educated about the process and shop around are far more likely to get a mortgage with the best possible terms and a potentially significant savings over those who don’t.
The agency, which drew its data from a voluntary survey included in mortgage applications, is now promoting a consumer education tool — the interactive online toolkit “Owning Your Own Home” — to help consumers be better prepared when buying a house.
“Our study found that many consumers are not shopping for a mortgage,” CFPB Director Richard Cordray said. “Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating. … We want to enable consumers to be more savvy shoppers.”
Shopping Around Pays Off
The data showed some 70 percent consumers relied on information from their lenders or mortgage brokers, the CFPB said, noting that while they are knowledgeable, they also had a vested interest.
Those who understood rates, types of loans and other aspects were far more likely to shop around for a good deal than those who weren’t, the survey found.
It isn’t unusual to have a spread of a half percent on a mortgage for someone with good credit. And the CFPB noted that on a loan for $200,000, saving that extra half percent could amount to about $60 a month, or about $3,500 in mortgage payments and greater equity growth.
The CFPB is also offering a mortage rate checking tool that allows consumers to put in the variables that a lender would consider — credit score, down payment, home cost — to get an idea of different loan types available and their interest rates.
The bottom line, the CFPB said, is the more a consumer knows going into the process the more likely they’ll get a good result.