Technology and the mortgage shopping experience

A recent study from Fannie Mae’s Economic & Strategic Research Group found some distinct differences in the way higher income earners look for a mortgage compared to lower income earners.

There is a particular gap among higher vs. lower income consumers. Higher income borrowers – those who earn above $100,000 a year – are more likely to use mortgage calculations to determine how much to borrow in guiding their decisions. They’re also more likely to choose a lender based on how competitive the lender is for their business.

Lower income borrowers – those who earn below $50,000 – are more likely to rely on real estate professionals, mortgage lenders, family, and friends for advice and recommendations while shopping for a mortgage. Lower income borrowers report that shopping for a mortgage would be easier if they had a better understanding of loan terms and costs.

Higher income borrowers tend to use online shopping about double the amount than lower income borrowers, according to the study. But all borrowing groups surveyed said they’d like to increase their use of online shopping tools to aid them when looking for a mortgage, such as comparison tools and product reviews.

Steve Deggendorf, Fannie Mae’s Director of Economic & Strategic Research, looked at the shopping behaviors of the two groups through the company’s regular National Housing Survey during the second quarter of 2013.

“Enhanced online tools, especially given the aspiration to use them much more often in the future, could help consumers of all incomes to become better mortgage shoppers and achieve better outcomes by addressing the issues they think will make the process easier, such as enhancing their understanding of mortgage terms and costs and their ability to make simultaneous comparisons of loan terms from multiple lenders,” said Deggendorf, in a statement.

Thorough mortgage shopping is important because it helps borrowers get lower costs and “fewer surprises at the loan closing table and higher long-term satisfaction with their choices,” Deggendorf says.

Despite a general increase in the use of mobile technology, respondents said they tended to rely on their personal computers when shopping for financial products and were also likely to continue to do so. In addition, consumers say that social media plays a small role in mortgage shopping now and is likely to play a small role in the future.