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Finding the lowest rate is the most important factor to consumers when choosing a mortgage lender, but most still can’t be bothered to comparison shop, according to a survey of more than 2,000 consumers by ICE Mortgage Technology.
ICE’s 2024 Borrower Insights Survey polled an equal number of homeowners and renters and found that the most important factors when choosing a lender boiled down to cost, speed, and having a variety of terms and products to choose from.
Source: ICE Mortgage Technology 2024 Borrower Insights Survey.
While 68 percent said finding the lowest interest rate was the most important factor in choosing a lender and 48 percent listed low lender fees, time to close (33 percent) and the variety of loan terms and products (32 percent) can also play a role in the decision-making process.
Only 21 percent said a referral from a Realtor was one of the most important factors in choosing a lender, and the availability of a Web or mobile-based application was important to just 17 percent of those surveyed.
Source: ICE Mortgage Technology 2024 Borrower Insights Survey.
Given that costs can vary significantly between mortgage lenders, it might be surprising that 84 percent of homeowners who had taken out a mortgage in the last 5 years only considered one (36 percent) or two (48 percent) lenders before closing the deal.
Last year, Freddie Mac published research demonstrating that borrowers who obtained two rate quotes stood to save as much as $600 a year on their mortgage payments, and getting at least four rate quotes could have saved more than $1,200 a year.
Another study by the Consumer Financial Protection Bureau (CFPB) highlighted the importance of shopping for FHA, VA and jumbo mortgages, since there’s a wider disparity in rates offered by lenders providing those types of loans.
However, the ICE Mortgage Technology survey found only 13 percent of borrowers compared rates from three lenders, and just 3 percent compared four or more.
The survey results highlight “the need for lenders and servicers to use all the tools at their disposal to anticipate the future needs of current customers and avoid losing business to more aggressive tech-savvy competitors,” ICE said in publishing its July 2024 ICE Mortgage Monitor report.
Mortgage product and pricing engines make it easy for borrowers to get custom rates from multiple lenders, and credit bureaus won’t penalize borrowers who rate shop within a focused period of 30-45 days.
So why don’t homebuyers shop around for the best deal?
A survey by Zillow Home Loans found that among those not inclined to shop around for the best rate:
- 30 percent were worried that getting multiple quotes would hurt their credit score
- 24 percent were happy with the first lender they contacted
- 19 percent said it takes too much time and effort to shop
- 15 percent thought all lenders offer the same rates
- 14 percent were embarrassed to share their financial information with lenders
Some comparison sites that claim to help borrowers research rates may be breaking the law by steering borrowers to lenders that pay them for traffic, the Consumer Financial Protection Bureau warned last year.
The CFPB also offers a mortgage rate exploration tool powered by Curinos, which collects the data directly from lenders. Once they’ve settled on a lender, the CFPB also advises consumers to compare costs for obtaining title insurance and settlement services.
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