Myth # 7: Google can find me the right home loan
The modern mortgage shoppers first step is typically to go to google and enter terms such as, “mortgage” or “refinance”. These search terms cost lenders $47 every time a user clicks on them. Below is a sampling of industry-related search terms and their average costs per click.
The conversion ratio for these clicks averages around 5%. That means that it takes a lender at least 20 clicks before they get a paying borrower.
Compared to other industries, this is a really low conversion rate. Even though there are a large number of people looking for a mortgage, lenders tend to struggle to negotiate their way into a deal with that borrower. A key issue is that rates function as a commodity, which means that a large number of Loan Officers are all competing for the same business – and some are going to fall short. With a 5% conversion and $47 per click, it takes $940 dollars for a lender to get to a borrower.
This cost is then passed on to the borrower. By the time you acquire your home loan, the lender has already built that cost into the loan in some way, shape, or form. This has no benefit for any party involved – the borrower ends up paying a higher cost, and the lender ends up spending outlandish amounts in order to try to acquire new borrowers.
Consider this example search for the term home refinance:
After scanning through the results returned, we found the following:
The other issue created by these searches pertains to the level of uncertainty that they add to the process. The results gathered from simple internet searches can return a fairly wide range of potential mortgage rates – in this case ranging from 3.71% to 4.107%. Obviously, the mortgage shopper wants to get the lowest rate possible, but this type of search will not definitely provide an answer related to that. However, using Parlend’s mortgage calculator, a mortgage shopper can quickly access this information without having to go through the online search process.