Consumers who don’t use online technology to shop for mortgage rates or look for a lender or real estate agent may be selling themselves short, with lower-income borrowers particularly at risk, according to Fannie Mae economists.

Findings from a recent study suggest that online tools that improve borrowers’ understanding of mortgage terms and costs and allow borrowers to simultaneously compare loan terms from multiple lenders lead to better outcomes, including lower costs, fewer surprises at the closing table, and higher long-term satisfaction with choices, Fannie Mae’s Economic & Strategic Research Group said.

The study found significant differences between how lower- and higher-income borrowers shop for a mortgage. The group defined lower-income borrowers as those with family incomes of less than $50,000 and higher-income borrowers as those with family incomes of more than $100,000.

Higher-income mortgage borrowers were more likely to:

  • Select a lender based on offer competitiveness.
  • Rely on their own calculations and make more extensive use of tools to calculate how much to borrow.
  • Say that they would welcome the ability to shop and compare loan terms from multiple lenders.

Lower-income borrowers put more stock in referrals from a real estate agent, mortgage specialist, family member, friend or co-worker than higher-income borrowers did, said Steve Deggendorf, the research group’s director of business strategy, in a study commentary.

The research group pulled second-quarter 2013 data from the mortgage giant’s National Housing Survey, which polls more than 1,000 homeowners and renters each month.

Source: Fannie Mae

Source: Fannie Mae

Higher-income borrowers used online shopping tools about twice as often as lower-income borrowers, though all income groups said they would like to use the Internet to shop even more than they currently do.This indicates that online tech will likely play an increasingly larger role for all borrowers in the mortgage shopping process and offers opportunities to improve that process, Fannie Mae economists said.

There’s plenty of room for improvement. Among survey respondents, only 5 percent of lower-income borrowers and 12 percent of higher-income borrowers said they had used online tools or applications to calculate how much to borrow through their mortgage loan.

While nearly half, 48 percent, of higher-income borrowers said they had obtained a mortgage quote online, only 20 percent of lower-income borrowers had.

When it came to deciding how much money to borrow, advice from a lender or real estate agent was the most influential factor for 23 percent of lower-income borrowers. For higher-income borrowers, that figure drops to 15 percent.

Despite the rise of mobile devices and social media, consumers said they were much more likely to use desktop computers than mobile devices or social media to shop for their mortgage and manage their personal finances in the future.

Recent mortgage borrowers — those who had obtained a mortgage in the past three years —  were more likely to use technology to shop for a mortgage, perhaps because the use of online tools has grown in general, and because such borrowers were younger, more educated and earn higher incomes than prior borrowers.

Source: Fannie Mae

Source: Fannie Mae


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