One reason people find themselves in New York bankruptcy is that the interest rates on their debts are too high, which raises their monthly payments needlessly.Hopefully this is common sense, but according to the Consumer Financial Protection Bureau (CFPB) many Americans don’t consider interest rates when buying homes. Specifically, they don’t “shop” for mortgages, often taking the first offer, even if other lenders would have given lower interest rates. This insight appears in a survey the CFPB conducted of 1,922 households that had taken out new mortgages in 2013. Its findings complement the recent report finding that refinancing is an underused option.
Here are a few things the CFPB discovered:
- Although more than half of all borrowers seriously considered applying to more than one lender, as many as 77 percent applied to only one mortgage broker. The percentages were about the same for first-time home buyers and experienced purchasers.
- Of the households that applied to more than one lender, the vast majority (80 percent) said that they were searching for better terms.
- Consumers trust mortgage lenders, as indicated by the two-thirds or so who said they used their lenders or brokers to gain information about how mortgages worked. A distant second were real estate agents or builders. Surprisingly, buyers relied on the Internet about as much as family or friends. However, people who were less familiar with the mortgage process consulted with family and friends, as well as real estate agents and builders, more than experienced homebuyers.
Because so few people shop for mortgages, the CFPB is providing a series of Web tools to help homebuyers understand the interest rates they may be charged in their areas. The New York Times reports that both the Association of Mortgage Professionals and the Mortgage Bankers Association criticized the CFPB for focusing on interest rates without discussing closing costs, fees, and other benefits to a slightly higher interest rate, like a quicker approval.
The CFPB’s article can be found here (pdf), and its Web tool here. The Times article is here.
The CFPB is correct that a slightly lower interest rate can save homeowners thousands of dollars in the long run, and they can reduce monthly payments. The added income can help homeowners save in case of emergencies. But if you are already finding yourself in financial difficulties, then talking to a New York bankruptcy lawyer can help you assess your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy automatic stay Bruce Weiner for a free initial consultation.