A recent study by Fannie Mae found some distinct differences in the ways
higher income earners look for a mortgage compared to lower income
earners. Steve Deggendorf,
Fannie Mae's Director of Business Strategy looked at the shopping behaviors of
the two groups through the company's regular National Housing Survey during the
second quarter of 2013.
Deggendorf not only found distinct differences in the shopping
behaviors of higher and lower income mortgage borrowers but also found
opportunities for online tools that could improve the ability of all borrowers
to shop for a mortgage. Careful
shopping, he says, "could help mortgage borrowers obtain better
outcomes, including lower costs, fewer surprises at the loan closing table, and
higher long-term satisfaction with their choices."
The study defined the two income groups as those with family incomes below
$50,000 and those above $100,000 and found that in general the higher income
borrowers were more likely to rely on their own mortgage calculations and use
of tools to assess how and how much to borrow.
They were also more likely to pick a lender based on its
competitiveness. The lower income group
was more likely to rely on real estate agents, mortgage lenders, family, and
friends for advice and recommendations. In addition the higher income group more often
said that a better ability to compare multiple loan offers would make shopping
easier while the lower income respondents wanted earlier to understand loan terms
The higher income group tended to use online shopping about twice as much as
the lower income group however all groups would like to increase their usage
indicating that the Internet will likely play a growing role for all borrowers
and that there is a need for shopping enhancements.
The study found that those who have obtained a mortgage in the last three
years were more likely to have used technology in their mortgage shopping than
borrowers from an earlier period. Deggendorf
said this could be partially explained by the growing use of on-line tools in
general but also by recent borrowers having higher income and education levels
than earlier ones.
Despite a general increase in the use of mobile technology (tablets and
smart phones) respondents said they tended to rely on their personal computers
when shopping for financial products and were also likely to continue to do
so. Respondents also indicated that social media
would probably continue to play a small role in mortgage shopping as is
currently the case.
Deggendorf says many researchers have observed that the use of
online research and mobile tools enable consumers to obtain product reviews and
compare prices both at home in in stores.
He says that only time will tell what inroads enhanced technology tools
allow us to make in improving outcomes for more complex activities such as
mortgage shopping. They could, for
example, offer real-time information and education where and when needed such
as when house-hunting or sitting face-to-face with a lender. "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