We shop for almost everything. Why don’t we shop for home loans? Most homebuyers don’t, and the cost is significant.
Let’s take a quick walk down memory lane. Close your eyes and think about 1996. Remember what it was like to buy things from a store? To actually have to drive or walk to a physical place, pick an item and exchange money (maybe even in cash!) for an item.
In 1996, I remember buying a TV. It looked something like the picture below. I was proud of the questions I asked the salespeople and the $600 I paid. I drove around to several different stores (Sears, Circuit City and Wal-mart) to learn about different TV technology. I ended up not just saving $100, but getting a lot of great knowledge about TVs.
Ok, now let’s hop back to the present. Reading reviews and comparison shopping has become a staple of life in 2015. Most large online retailers include product reviews and even include prices of items from other sellers. In physical stores (if you still go to those), you can use a comparison tool like RedLaser to save a few nickels on your granola or find out what other granola-eaters thought about it.
We read reviews and compare everything from cereal to cars, so surely you would do the same when making the largest purchase of your life. Right?
Well…not exactly. Most homebuyers (over 50%) do not shop for their mortgage. Researchers Susan Woodward and Robert Hall found that we’re leaving money on the table by not getting multiple quotes for our mortgage. (We read the whole paper, Diagnosing Consumer Confusion and Sub Optimal Shopping Effort: Theory and Mortgage-Market Evidence, so you wouldn’t have to. If you want to check it out for yourself, coffee up, grab your stats textbook and click here.) We would also tell you that by not finding a great loan officer, you’re also setting yourself up for a lot of frustration.
What’s it worth to you?
If I posted a hypothetical job on Craigslist – see below, would you take it?
I’m guessing that you would. A couple of phone calls for $2,500 is a no brainer. But why don’t we shop for a mortgage? Or even compare the reputation of two people that were referred to us?
To quote from the paper: “…with $200,000 principal, the savings [from getting quotes from an additional one or two brokers] are $1,866 and $2,664 [respectively].
Wow — over $2,500 on a $200,000 mortgage is a lot of savings. And many of us have mortgages well north of $200,000. There’s even more at stake if your mortgage is, for example, $400,000.
Harder than it looks
Back to the question. Why don’t we shop for mortgages? The biggest reason is because it’s difficult to shop. To get an accurate quote, you would need to share documents that allow a broker to get a better picture of your financial situation. Imagine sharing your W-2s, pay stubs, bank statements and taxes with multiple mortgage brokers. It takes a lot of trust have your personal information in the hands of multiple people. If only there was a tool like Redlaser for mortgages.
We created Maxwell because we were frustrated homebuyers. Technology exists to read reviews and comparison shop in almost every area of our lives. Why should mortgages be any different?
Would you choose the most reputable loan officer who gave you his or her most competitive rate? We sure would.
Maxwell makes it easy to shop and get the best mortgage from a great loan officer. Maxwell helps you to collect the documents lenders care about upfront and then we anonymize your information. We share the anonymous version with great loan officers and they make their best offer to get your business. This way you can be in control of your information.
Once you select the loan officer you want to work with based on her reputation with borrowers and realtors, you authorize her to see your original documents. From there, you’re off to the races on closing your loan.
Maxwell is not a mortgage broker or a loan officer. Just like eBay is not a store and Airbnb is not a hotel. We just make it easy for you to shop and find an incredible professional to guide you through the most expensive purchase of your life.
It’s the mortgage experience we want as homebuyers. Simple, intuitive and human.
If you’re looking to buy a home or refinance soon, we’d love to help you save.
Click here to get started.