Most shoppers compare prices when looking for new clothes or a new car, but you’d be surprised to learn that some aren’t nearly as conscientious when it comes to home ownership. A recent study by the Consumer Financial Protection Bureau finds that most consumers do not comparison shop when it comes to selecting a mortgage.
However, not engaging in comparison shopping for a mortgage could leave you paying way more cash than you should. Taking the time to find the lowest interest rate could save you a significant amount of money.
“…Our research showed that a borrower taking out a 30-year fixed rate conventional loan could get rates that vary by more than half a percent. Getting an interest rate of 4.0% instead of 4.5% translates into approximately $60 savings per month. Over the first five years, you would save about $3,500 in mortgage payments. In addition, the lower interest rate means that you’d pay off an additional $1,400 in principal in the first five years, even while making lower payments,” said the CFPB in a statement.
The CFPB’s 2013 survey of mortgage borrowers discovered the following:
- Consumers don’t shop. Almost 50% of borrowers only seriously consider a single lender or broker before deciding where to apply.
- Consumers only apply to one lender or broker. Approximately 77% of borrowers only apply with a single lender or broker, instead of filling out applications with several lenders or brokers to secure the best deal.
- Consumers often rely on information from people with something to sell. Lenders and brokers were the most popular source for information about mortgages, with 70% of mortgage borrowers reporting that they relied on them heavily as a source of information.
In light of these facts, the CFPB has a created a homeownership guide entitled, Owning a Home.