With the housing market slightly recovering from its collapse a few years ago, Americans are searching to purchase a home again, but are they going about it in the right way? A new survey suggests potential homebuyers aren’t.
According to a study by the Consumer Financial Protection Bureau (CFPB), nearly half of United States consumers don’t actively consult with various mortgage lenders in order to get the best home mortgage. This has prompted the CFPB to ask the question: are Americans getting the best deal?
Ostensibly, they are not. The report found that a consumer borrowing $200,000 over the course of 30 years and paying 4.5 percent interest will actually pay approximately $60 more each month than someone who borrowed at four percent, who will also accumulate equity quicker.
There’s no doubt that a mortgage is the biggest investment that a person will make. However, consumers are likelier to browse around for a pair of shoes instead of mortgages and borrowing rates. This has prompted the CFPB to utter the phrase: “Know Before You Owe,” which is part of a campaign launched in 2013.
Here are the four major findings from the study:
- Consumers don’t shop around
- Americans apply to only one lender
- Home-buyers will depend on information from someone who is selling something
- Borrowers are likelier to shop around if they know more
“Almost nobody looks only at one house and decides to stop right there,” said Richard Cordray, the director of the CFPB, in a statement. “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.”
The CFPB released its “Owning a Home” mortgage education tool. It is an array of different tools to provide consumers with information, terminology, checklist, costs and other important aspects that can make the home-buying process simple from viewing the very first house to signing on the dotted line.
Speaking at The Brookings Institute on Monday, Cordray outlined the suite of tools. “In other words, we are giving consumers direct access to the same type of information that the lenders themselves have,” said Cordray, who noted that shopping around for mortgage rates will not hurt your credit score.