With people still trying to deal with their distressed properties and investors snapping up properties with all cash offers we found it curious to see a recent report about consumer loan choices. The report states that buyers’ minds become so taxed after they go through the process of finding a home that they often rush into applying for a loan.
Oftentimes, they opt for the first choice and they don’t realize the inherent risk in that loan. Oftentimes they pick loans with the lowest initial monthly payment, even though later the loan will jump to significantly higher rates. Sound familiar?
Two George Washington university instructors (associate professor Vanessa G. Perry and doctoral student J.D. Lee) call the phenomenon “cognitive resource depletion.” After searching for a home for so long, buyers can often get burned out by the process, and then to finish the process they simply choose a loan without analyzing the big picture.
Whatever the educati call the phenomenon, it sure helps to be pre-approved but we suggest that you find a loan officer for the long term who will look after your best interests. A loan should not be just a blue light special or a one-shot deal. Also, professor Perry suggests waiting a couple of days before applying for a loan (which would be tough in a short loan contingency transaction). Like a marriage or a home, a loan should be something where only fools rush in.