As reported by Lew Sichelman in the Los Angeles Times, new research suggests that buyers' minds are so taxed after they go through the ordeal of finding a house that they often rush into the next step — applying for a loan — and then end up making poor choices.
Sometimes they opt for the first choice presented to them without regard to the dangers that may be inherent in that particular mortgage.
Other times they pick the loan with the lowest monthly cost, even though the interest rate might skyrocket in a few short years.
It's a phenomenon called "cognitive resource depletion," and it has been identified by two George Washington University instructors as an often crucial factor in why the choices borrowers make may come back to haunt them.
After the shopping experience, consumers may devote less attention to the mortgage-choice process while relying on faulty-decision shortcuts that "ultimately result in a higher propensity" to select higher-risk mortgage products.
Today’s loan choices and decisions are so complex, even financially savvy borrowers should take caution and benefit from avoiding this dangerous trap.
Because buying and loan application decisions are "so intense" to act upon quickly AND … because most real estate purchase contracts compel buyers to secure funding within an often abbreviated time frame … most buyers would be better off to apply for the loan FIRST by getting pre-approved or at the very least, pre-qualified by having identified which mortgage product is the best.
Then … once that hurdle is overcome, you can begin searching for your new home. This advice has been given time-and-time again, but now in light of this new phenomenon, we can see why it is so important.
For more information on how to get started and what to ask a future mortgage lender to make sure you are in the best of hands … visit my website, www.superbroker.com or call 562-882-1581.