Home >> Daily Dose >> Home Advantage: Why Shopping for a Mortgage First Helps
Print This Post Print This Post

Home Advantage: Why Shopping for a Mortgage First Helps

Low- and moderate-income homebuyers tend to focus their efforts on shopping and negotiating for their house with very little focus on shopping and negotiating for their mortgage, according to a recent study by Fannie Mae.

The study followed 14 low- and moderate-income families through their home search over a period of four to nine months. At the end of the study, about half were able to purchase a home. The other half returned to what Fannie Mae calls the “preparation phase,” which includes budgeting and building credit or income history.

Income instability and insufficient credit held these homebuyers back from experiencing a smooth purchasing process. The participants also demonstrated a lack of knowledge and engagement with the mortgage process.

Throughout the homebuying process, the participants “focused overwhelmingly on the home search,” considering the location and various features of the home itself, according to Mark Palim, VP and Deputy Chief Economist, Fannie Mae.

However, they did not offer the same level of attention to the mortgage.

“Research participants considered the mortgage as a hurdle to overcome throughout a time-pressured home purchase process, not a focus,” Palim said on Fannie Mae’s Perspectives blog.

Prior to getting pre-approved, participants had only “vague ideas about mortgages,” according to Palim.

After pre-approval, participants in the study tended not to re-evaluate lenders or available mortgage options. The criteria for choosing a lender tended to be limited to deadlines, focusing on “who could get them a mortgage by the deadline, allowing no time for comparison shopping,” according to the study.

While the home search was described as “exciting,” “stressful,” and “interesting,” emotions related to the mortgage experience ranged from neutral to negative, including “stressful,” “overwhelming,” and “intimidating.”

According to the study, participants tended to select a mortgage product based on how the monthly payment fit their monthly budget, and they applied for only one mortgage loan.

“In addition to a lack of mortgage knowledge–as shown in prior studies–here, too, we see evidence that consumers engage with the mortgage market too late in their home buying journey and often fail to shop around,” Palim concluded. “These results highlight consumer benefits of becoming informed about mortgage options and requirements at the beginning of the home buying process.”

About Author: Krista Franks Brock

Krista Franks Brock is a writer and editor who has covered the mortgage banking and default servicing industries since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
x

Check Also

SingleSource Adds Beth Davis to the Team

As VP of People Development, Beth Davis will focus on aligning business strategy with people practices to enable high performance and employee engagement.

GET THE NEWS YOU NEED, WHEN YOU NEED IT.

With daily content from MReport, you’ll never miss another important headline in originations, lending, or servicing. Subscribe to MDaily to begin receiving a complimentary daily email containing the top mortgage news and market information.