Shopping for a mortgage: Urged but not often done

02/11/2015

Shopping for a mortgage: Urged but not often done

PHILADELPHIA – Feb. 5, 2015 – When it comes to mortgages, experience apparently isn't the best teacher.

Recent findings by the federal Consumer Financial Protection Bureau (CFPB), which oversees mortgages and credit cards, among other things, show that almost half of U.S. borrowers don't shop for home loans.

The findings were similar to those of LendingTree.com in December 2010, during the depths of the foreclosure crisis. That survey found that 40 percent of 1,317 people contacted had obtained a single quote for a mortgage.

The Consumer Financial Protection Bureau's findings are part of its "Know Before You Owe" initiative, an online toolkit to help consumers shop for mortgages at consumerfinance.gov/owning-a-home.

While acknowledging that the risky loans of the housing bubble are history, CFPB director Richard Cordray said that for many people, "the mortgage process continues to be intimidating."

Given that 7 million houses have been lost to foreclosure since 2004, according to real estate data provider CoreLogic, the fact that consumers spend more time shopping for cars than 30-year home loans was surprising to some industry observers, who said their clients say they do research mortgages on their own.

"I'd say about half my buyers shop around and compare fees and rates regularly," said Marilou Buffum, an agent with Berkshire Hathaway Home Services Fox & Roach Realtors in Chestnut Hill. "When money is concerned, many clients want to compare rates and costs."

Many buyers are looking online, said Nicole Ritchie, of BHHS Fox & Roach Realtors in Media, so she urges her clients to "make sure you check these people out completely."

Some give pre-approval "in a couple of seconds," but "how do they know if they haven't seen all of the required documentation?" Ritchie asked.

For first-time buyer Melissa A. Jackson, keeping costs down was key, so she did her homework.

Jackson, 25, who closed on her house in Gloucester County just before Christmas, is a college-educated senior marketing analyst with a British software company.

"Instead of going with a FHA or conventional loan, which are probably two of the most common options for home buyers these days, I did some research and found that I fit within the guidelines for a U.S. Department of Agriculture [rural] loan," she said.

Once she knew what she wanted, Jackson said, she worked with a mortgage broker "on the pros and cons of each type of loan and which was a better option for me given my situation."

Marc Pollicino, vice president of sales for the Aurora Financial Group in Marlton, said he believed CFPB was "again overstepping its area of expertise" by emphasizing shopping for a better rate using its rate-tracker tool, which "can be an ugly game and invite more deception."

Late last week, two mortgage-lenders groups urged the bureau to take the tracker tool down because it "does not fully take into consideration [the] wide range of variables that can have an effect on mortgage rates."

Though most of his clients don't mention talking to others, Pollicino said, when he shows buyers at his seminars how to shop for loans, they ask him why he brings up the subject.

"It really comes down to customer service," he said he tells them, adding that by providing accurate information and offering the best financing option, "you'll come back."

S. Clark Kendus, of Weichert Realtors in Media, said that because "the mortgage process can seem daunting to many," they rely on their agents to guide them.

Although 90 percent of his clients use Weichert's in-house lender, Kendus said, he always tells buyers who don't to make sure whomever they choose will attend the settlement and be available "nights and weekends, like any agent."

Susan Yannessa, of Weichert Realtors in Blue Bell, said that "if a repeat buyer has a relationship with a lender," they will give the lender repeat business." First-timers, however, seem to "want things done as quickly as possible – yesterday" – so will go in-house for a loan.

Tight credit requirements work against shopping around, said Angus Lamb, of Keller Williams Real Estate in Sewell. People on the edge of qualifying are so thankful when they find a lender to help them do so, he said, "they feel obligated to use that company."

Online brokers and discounters lack "personal service," Lamb said, and loans often fall through or are "nightmares to deal with." So it is better "going with a firm they can touch and see and gets the loan done on time."

Copyright © 2015 The Philadelphia Inquirer, Alan J. Heavens. Distributed by Tribune Content Agency, LLC

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