According to the website of the PAR Program, founded by Jeremy Schoemaker , “many study show that people interact with a service or product eight (8) times on average before making a buying decision.”
Although that holds true for 50% of home buyers, the other 50% – according to the report by the Consumer Financial Protection Bureau (CFPB) – do not take time to shop around for a mortgage when purchasing a home.
This just goes to show that Americans may seem penny-wise but they are also pound-foolish in terms of finances.
Though consumers spend a major amount of time to look for bargains for their daily purchases, they also spend as little time to look for mortgage bargains (which is a lot more important).
American consumers, in general, are fond of using coupons, looking for sales, and also looking for stores that would give them more for only a buck. They’d put huge efforts into getting huge bargains from electronic gadgets, cars, appliances, and even hotel accommodations.
But according to a survey conducted by the CFB, they’ve found that almost half of the recent mortgage borrowers do not shop around for the best mortgage rates available for buying a home; which is considered to be one of the biggest investments they will ever make.
Their failure to look for the best mortgage rate will surely cost them significantly. The CFPB found that “consumers who consider interest rates offered by multiple lenders or brokers may see substantial differences in the rates. For example, our research showed that a borrower taking out a 30-year fixed rate conventional loan could get rates that vary by more than half a percent.”
According to the CFPB, a mortgage rate of 4% compared to 4.5% can significantly make a difference of at least $60 per month; which means that you can save up to about $3,500 over 5 years. Lower interest rates would only mean that the house can be paid off earlier since the additional principal can be paid although there are lower payments.
This mistake commonly made by Americans can be attributed to being the easy target of the internet marketing strategy by some of the financial institutions. They often e-mail potential borrowers or post ads that will entice them into sending loan applications for mortgages; thereby, pushing them to make an unwise decision.
This is primarily the reason why some consumer credit organizations are now doing an initiative on educating people about mortgages. This initiative helps promote financial literacy – which is, frankly, what many Americans really need.