Homebuyers rarely re-evaluated lenders or mortgage choices
The lack of focus on the mortgage process among low- and moderate-income homebuyers complicates their home-buying process, according to new research released by Fannie Mae.
Fannie Mae’s ethnographic study covered 14 low- and moderate-income prospective first-time home-buying households. Given the research methodology, Fannie Mae said the findings are qualitative in nature and are not meant to statistically represent a larger population.
Fannie Mae found that the research participants focused overwhelmingly on the home search through the home-buying process rather than the mortgage. Location and home features were given more importance than knowing how to get a mortgage, what lenders to work with, and when to get started.
Before study participants were pre-qualified or pre-approved, they had vague ideas about mortgages, Fannie Mae found. They only started to build some mortgage knowledge once they began the pre-approval process. Participants rarely re-evaluated lenders or mortgage choices once they picked a lender for a pre-approval.
The study also found that the research participants did not shop around or negotiate mortgage terms, despite doing so for many aspects of the home purchase, such as closing time and repair costs. Participants did not have time for comparison shopping as they selected lenders based on who could get them a mortgage by the deadline.
Fannie Mae found that participants focused on the home purchase itself and merely considered the mortgage as a hurdle to overcome. While half of the participants were able to buy a house at the completion of the research, the other half had to go back to the preparation phase. As a result of having to build credit or income history and budgeting again, this half of the participants had home purchase journey that lasted for more than two years.
Related stories:
New York to intervene in fair housing suit against HUD
HUD faces lawsuit over delay of fair housing rule
