A new mortgage tool, "The Loan Estimate," was released to help home buyers search for a home with mortgage this year. Latest reports, however, state that this tool remains unused by majority of the home seekers for several reasons:
First reason would be because of the new disclosures and rules governing the home mortgage transactions. This is part of "Know Before You Owe" campaign. These new rules are stipulated in the Consumer Financial Protection Bureau who launched the ambitious tool, "The Loan Estimate" which is just an upfront piece replacing the traditional "Good Faith Estimate" and "Truth in Lending" disclosures.
Second, not all buyers are doing "The Loan Estimate" scheme where they allow them to have 10 days for shopping the competition before they could finally agree to the deal or otherwise. Because of this, the mortgage tool is not effectively used in this purpose.
Third, in relation to the buyers' bad habit of not examining the mortgage status of the property, they are not actually interested to have three or more lenders before they could make their final choice.
Through "The Loan Estimate," they could have clearer comparison of the details regarding the mechanics of the loan such as the interest rate, annual percentage rate (APR), including monthly payments and interest payments, property taxes, insurance and other necessary items compared to the previous systems, still, this tool's powerful use is neglected.
Fourth, people who purchase residential properties are focused on just buying and financing a home system. Experts said they don't bother about the new tool to use when searching new mortgage lenders, rather they use this simplified searching way of doing it. In fact, 95 percent are doing it the old way.
"I don't think consumers are changing the way they shop simply because they have a new tool to do so," Bill Emerson, chief executive of Quicken Loans, the country's second highest volume mortgage lender, said.
John Adamaitis, vice president and residential lending manager for Insignia Bank said, "Buyers do not have the time to shop due to the pressures of meeting commitment and closing dates. Most lenders are priced the same and it comes down to which lender the Realtor referred them to."
Fifth, the deadlines provided by some local real estate contracts and the issuance of "The Loan Estimates" are in conflict. According to the real estate agents, most of their clients usually have a 10-day shopping period. After arriving to their final decision to which house they will get, that's the time they will apply for mortgage.
At this point, they already have pre-approved mortgage from a lender, so they don't need the issue provided by "The Loan Estimate."
Sam Glifford, spokesman of CFPB, said that he is hoping that the next batch of homes buyers will be smarter enough to seek proper loans for their mortgage just like they are shopping for houses they could live.
