A significant portion of consumers, 36%, are receiving only one mortgage quote when shopping for a loan, with both first-time and repeat applicants displaying similar behavior, Fannie Mae said.
Furthermore, the results of the first-quarter study this year are in line with other research conducted in 2014 and 2019, meaning behavior hasn’t changed in the seven years after the introduction of the Loan Estimate form by the Consumer Financial Protection Bureau that made it easier for consumers to comparison shop lenders.
A separate study from Zillow Home Loans actually puts the situation in a worse light, claiming that 72% of prospective buyers have not shopped around — nor have any plans to — for a mortgage that best suits their financial situation.
The spike in mortgage rates heightens the need for consumers to shop for multiple quotes. Even though rates fell by 47 basis points to an average of 6.61% in this week’s Freddie Mac Primary Mortgage Market Survey, they are still 3.5 percentage points higher than the average of one year ago, 3.1%. It was during the first quarter, the period that Fannie Mae conducted its survey, that mortgage rates started to zoom up, finishing the period at 4.67%.
The top reason cited in Fannie Mae’s first-quarter National Housing Survey by recent homebuyers who received only one quote was that they felt the most comfortable with the lender they received the quote from, at 39%. The second most common reason given was satisfaction with the first quote received, cited by 29%.
These reasons were also top reasons cited in the first quarter 2019 and first quarter 2014 polls, a blog post from Fannie Mae’s John Thibaudeau, vice president, single-family real estate asset management; and Rachel Zimmerman, market research advisor, National Housing Survey lead.
“Feeling comfortable with a lender or ‘satisfied’ with the first mortgage quote could be interpreted as taking the ‘easy’ path, since it requires less time investment and critical thinking during a process that many people already find complex and stressful,” Thibaudeau and Zimmerman said.
“Homebuyers, especially first-time home buyers, may feel overwhelmed with the complexity of comparing the many components that make up mortgage costs, including interest rate, closing costs, and points across different mortgage offers.”
The reasons a repeat homebuyer might only get one mortgage quote are different. Some feel they’ve gotten the best deal from a lender they trust, or they might be less price sensitive, Thibadudeau and Zimmerman theorized, adding that more behavioral research needs to be done.
Moreover, fewer consumers are negotiating with their originator to see if they can get a lower rate compared with three years ago. Only 33% of recent homebuyers surveyed in the first quarter said they attempted to bargain to reduce their rate offer, compared with 40% in the 2019 survey, Fannie Mae said.
“The decrease in negotiating could be due to the historically low mortgage rate environment and highly competitive housing market homebuyers were experiencing when buying homes in 2021,” Thibaudeau and Zimmerman said. “It could also indicate that some consumers do not know they have the ability to negotiate.”
Meanwhile, more than 90% of buyers did not shop for title and settlement services after receiving their lender’s closing cost estimate, Fannie Mae found.
The Zillow survey said the leading reason many consumers don’t shop is because they are worried about the impact on their credit score, with nearly 30% believing multiple application submissions would hurt.
Just under one-quarter of the respondents, 24%, said they were happy with the first lender they contacted; 19% claimed it took too much time and effort; 15% believed all mortgage lenders offer the same rates; 14% were embarrassed to share their financial information with lenders; and 8% of the responses were categorized as other. Respondents could cite more than one reason.
Nearly half, or 46%, of prospective buyers that looked to get pre-approval only submitted an application to a single lender.
At the same time, 28% of prospective buyers spent at least a month researching vehicles for their next car purchase, but only 13% said they spent that much time researching mortgage lenders before applying, Zillow said. Before booking their vacation, 23% spent a month doing research, while 12% took the same time frame in determining which television they would buy.
The survey was conducted online by The Harris Poll on behalf of Zillow Home Loans between Aug. 29 and Aug. 31, and included data from 3,082 U.S. adults ages 18 and older, among whom 1,104 are looking to buy a home in the next two years.