Obtaining and comparing multiple mortgage quotes and being better informed about the homebuying process may help borrowers get the right mortgage and financial terms, and may also lead to increased customer satisfaction and retention for lenders, according to a recent Fannie Mae report.
But the homebuyer experience is still highly dependent on income, age, race and ethnicity, and how new buyers are to the mortgage application process, the government-sponsored enterprise (GSE) said.
According to the GSE’s analysis of its National Housing Survey data, about a third of recent homebuyers did not shop around for their mortgages, often reporting that they were satisfied with their first quote. Previous experience obtaining a mortgage did not increase the borrower’s likelihood of shopping for multiple quotes.
First-time homebuyers are likely to use lender referrals from friends, family members or co-workers, but it’s unclear whether these buyers are evaluating these referrals to determine how well the recommended lenders fit their needs and whether they are aware of the referring parties’ interest, if any, in the transaction. More likely to shop around are higher-income, younger and minority borrowers. However, when it comes to surprises at the closing table, first-time and minority homebuyers are more likely to report unexpected changes, Fannie Mae said.
The findings suggest there are opportunities to help consumers be better informed and improve upon the mortgage shopping process. That is, in fact, the mission of the Consumer Financial Protection Bureau’s new TILA-RESPA Integrated Disclosures rule that takes effect for all mortgage applications taken after Aug. 1.
“In particular, consumers may benefit from better tools and advice from knowledgeable, objective third parties to assess the outcomes that lenders provide across multiple variables — such as cost, efficiency and customer service — allowing them to balance these trade-offs to best meet their needs,” Fannie Mae said. “As large and infrequent as the mortgage transaction is in most people’s financial lives, borrowers may be leaving money on the table by not shopping around and negotiating for the best terms they can get. Getting a better deal can help borrowers sustain their mortgage even in the case of unexpected increases in expenses or decreases in income.”
Encouraging homebuyers to seek multiple sources of information, determine the key criteria that are important to them and ask detailed questions about the basis for a lender recommendation when shopping for a mortgage may help them find a lender that best meets their individual needs. This increased understanding in the earlier part of the mortgage shopping process may help reduce the frequency of unexpected changes at the closing table, the GSE concluded.