According to a survey by Lending Tree, 40% of homeowners obtained a single mortgage loan quote before buying their home and only 28% feel confident they got the best deal.

Ninety-six percent said they compare prices when shopping for everything except a mortgage. Seventy percent said shopping for the best loan was frustrating and the process was too complex to understand.

Roughly 70% of surveyed homeowners said they spent the equivalent of a full working day looking for their loan. One out of every ten said they shopped for the best deal for less than five minutes.

first tuesday take: The government has developed stricter lending regulations aimed at protecting consumers from being pressured into an over-priced mortgage, but are homeowners equipped with the knowledge of lending they need to discern for themselves what type of mortgage they will be able to manage?

The unfortunate reality of American economics is that analysis is left to the economists, particularly behavioral economists who study things like information overload (too many choices and too many decisions) and procrastination (putting off the mortgage shopping effort after the first inquiry or the agent’s endorsement).

Initially, most homebuyers know very little about the principles of lending that profoundly affect their financial health. Their disinterest due to lack of understanding translates into wholly inadequate inquiries about the consequences of a mortgage loan. [For more information regarding consumer protection regulations, see the October 2010 first tuesday legislative watch, TILA circa 2010; consumer protection enhancement; for more information regarding consumer confidence, see the September 2010 first tuesday article, The era of the financially illiterate homebuyer.]

With adversarial lenders and enigmatic government agencies unable or unwilling to invest in the fiscal education of prospective homeowners, those in need of a mortgage have only real estate professionals to approach for counsel. Then it becomes a decision based solely on which lender or type of loan is endorsed by the agent.

It is vital to a stable and long-term recovery of the real estate market that agents strongly encourage their homebuyers to press on beyond just one lender in search of the best home loan. [For more information regarding loan shopping, see the May 2010 first tuesday article, Shop, shop, shop until you drop.]

Educate your homebuyer about the facets of a good faith estimate (GFE), and work with them to ensure they understand how a lender determines the loan amount and rate for which a homebuyer qualifies. [For more information regarding the GFE, see the September 2010 first tuesday article, The good faith estimate is designed for shopping around; for more information regarding lenders use of FICO scores, see the June 2010 first tuesday article, The FICO score delusion; for more information on what borrowers need to ask lenders, see the June 2010 first tuesday form of the month, A borrower’s mortgage worksheet: who has the most advantageous financing.]

Re: “LendingTree survey shows 40% of homeowners took first loan offer” by HousingWire