RISMEDIA, May 1, 2010—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%) 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.
“The last few years should have driven home the lesson that understanding one’s home loan is critically important, but mortgages continue to be something that most people don’t want to spend time thinking about,” said Zillow Chief Economist Dr. Stan Humphries. “Not understanding a home loan can have catastrophic consequences. Starting from our first survey two years ago, I’ve been surprised that people spend more time shopping for cars and televisions than they do researching mortgages. I’m further surprised 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 than 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. 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.
Borrower’s remorse?
In the past five years, 16% of U.S. adults report they have obtained or refinanced a home loan and two-thirds (65%) of those admit they want to do things differently when shopping for their next home loan. Of the borrowers who want to do things differently:
58% would like to compare terms for loans on an apples-to-apples basis
56% would like fees standardized and easier to understand
52% would like it to be easier to shop around for rates
50% would like to get more than one quote without sharing personal information
19% would want to learn more about the mortgage process
15% would want it to be easier to choose a lender based on other’s experiences
Low mortgage rates make it an attractive time to buy or refinance a home
According to the latest Zillow Mortgage Rate Ticker, national mortgage rates remain historically low at 4.84% for a 30-year fixed loan, making it a great time to consider a home loan. In Zillow Mortgage Marketplace, borrowers are able to shop for a loan anonymously, while getting personalized loan quotes from pre-approved lenders, who have been rated by other borrowers. All quotes received are provided in a standardized format that makes it easy to clearly identify fees and compare multiple quotes. Borrowers receive an average of 11 custom quotes per request.
For more information, visit www.zillow.com.
