Recent research by Zillow Home Loans suggests that only 13% of prospective homebuyers purchase a mortgage before applying. In fact, people spend more time looking for vehicles and vacation destinations than they do for a home loan.
This lack of research can cost mortgage borrowers thousands of dollars. It has always been important to research the best mortgage deal and understand how to improve your credit score before applying. But at a time when mortgage rates are rising to record highs, it’s more important than ever.
Homebuyers don’t spend a lot of time researching mortgage options.
It’s long been known that potential homebuyers don’t spend a lot of time researching mortgage options , but a recent survey by Zillow Home Loans has thrown some numbers into the magnitude of the problem.
Research from Zillows shows that 72% of potential homebuyers don’t research a mortgage before applying, and only 13% said they spent at least a month researching mortgage lenders. To put that number in perspective, 28% of people said they spent at least a month researching vehicles before purchasing one, and 23% said they spent at least that time researching vacation options. In fact, survey respondents spend as much time looking for a new TV as they do on their mortgage.
The main reason for this lack of research? The fear that applying for multiple mortgages could affect a borrower’s creditworthiness. Of the prospective homebuyers in the Zillow survey, 30% said they were concerned that multiple mortgage applications would affect their creditworthiness. Generally not – although pre-approval of the mortgage can affect the credit score, buyers can buy and submit multiple applications in 45 days with just one hit to their credit score.
Why You Should Buy a Mortgage
The small amount of research most homebuyers do before applying for a mortgage can cost thousands of dollars. The average mortgage in the United States is now over $400,000. So if you save just 1% on your interest rate, you can make significant savings over the life of your loan.
Libby Cooper, vice president of Zillow Home Loans, points out that getting a mortgage is often the biggest financial decision anyone makes. “Taking the time to understand your credit report, troubleshoot issues, and consult with a qualified mortgage professional ,” she adds, “can make a significant difference in a homebuyer’s experience.”
However, as Zillow’s research shows, many people don’t fully understand how credit scores work. This prevents them from getting a good deal, but it could also mean paying more on a mortgage than necessary. Another recent Zillow analysis shows that shoppers with “fair” credit ratings may be paying hundreds more on their monthly mortgage payments than shoppers with “excellent” credit ratings.
For this reason, the best approach to negotiating a mortgage is often to do it first. Focus first on your own credit score, then contact mortgage lenders. Different lenders offer different interest rates, of course, but they generally offer better rates if you have good credit. Paying off existing debt, paying your bills on time, and regularly checking your credit report for errors can improve your credit score and ultimately lower the cost of your mortgage.