The impact of the widely publicized mortgage meltdown appears to have caused little change in borrower behavior during the past two years, according to a new Zillow Mortgage Marketplace survey of 2,729 adults conducted on its behalf in April by Harris Interactive. Borrowers report they are spending no more time researching a home loan today than they did in 2008 and those who obtained a loan in the past five years are soliciting fewer quotes — an average of three quotes versus four in 2008.
A home purchase is one of the largest investments most people will make in a lifetime, yet borrowers who obtained a home loan in the past five years typically spent just five hours researching their options, which is unchanged from March 2008. Nearly one-third (31 percent) spent two hours or less. This is on par with the typical time spent researching a vacation or computer purchase, and half the time consumers typically allocate to research a car purchase yet these items cost just a small fraction of the average cost of a home. For example, the average home loan costs five times more than the average car and 80 times more than the average vacation as outlined in the table below.
Not understanding a home loan can have catastrophic consequences. Starting from their very first survey two years ago, it is surprising that people spend more time shopping for cars and televisions than they do researching mortgages. It is even more surprising that they spend no more time shopping for mortgages now than they did two years ago, even in the midst of an unprecedented foreclosure crisis. People spend countless hours shopping for the perfect home, yet few realize that small differences in the interest rate or discount points can add tens of thousands of dollars to the overall cost of the home. In an area like mortgages, where the lender has so much more information that the typical borrower, getting multiple offers from lenders and being able to compare them relative to one another is critical to leveling the playing field.
In fact, borrowers who shop around and get a number of mortgage quotes can save thousands over the life of the loan — even half of a percentage point in loan rate can save the buyer of a $300,000 home more than $26,000. On a $500,000 home, the savings can be more than $44,000(ix). Even over a shorter period of time, the savings from a half of a percentage point can be substantial: in five years, the buyer of a $300,000 home can save nearly $4,500 and the owner of the $500,000 home could save closer to $7,500.
And thank you for making me Your Orange County Real Estate Connection.
Michael Caruso, Broker ABR ABRM CRB CRS GREEN GRI
2007 President, Orange County Association of Realtors (949) 753-7900