December 1st, 2014
A recent study by J.D. Power has shown many first-time homebuyers need to brush up on their knowledge of the mortgage process.
The researchers behind the J.D. Power 2014 U.S. Primary Mortgage Origination Satisfaction Study surveyed 3,893 consumers who originated a new home loan or refinanced within the past year. They sought to gauge satisfaction with the mortgage process using six criteria: interaction, loan offerings, application/approval process, problem resolution, onboarding and closing.
Of total respondents, 58 percent were first-time buyers, and of that group, 48 percent sought personalized advice from a local lender. Additionally, 54 percent of these respondents said they didn’t know which mortgages were available to them.
“With many prospective borrowers looking for guidance and reassurance, it is imperative that lenders are fully prepared to provide the detail and information these customers desire or the borrowers may decide to stay on the sidelines,” said Craig Martin, J.D. Power director of mortgage practice. “A potential challenge with first-time homebuyers is that they may be afraid to appear uninformed, so they won’t admit when they are confused or don’t understand something.”
Getting first-time buyers back in the market
Throughout the housing recovery, new homebuyers haven’t been as active. The latest existing-home sales report from the National Association of Realtors indicated first-timers made up 29 percent of total sales of existing homes in October, unchanged from the previous month and marking the 18th time in the past 19 months in which the share was less than 30 percent.
While there are some economic challenges for first-time buyers, growing confusion regarding loan options and regulations may also contribute to lower shares of new buyers, according to HousingWire. When new borrowing rules are coupled with overall confusion about the mortgage process, its not surprising some consumers would be hesitant about getting a mortgage for the first time.
Not only do these buyers need assistance when they’re starting out to fully understand their options, but they also need to be walked through the process. Per the J.D. Power study, only 41 percent of first-time buyers said their lenders laid out and explained various loan types, terms, fees and special programs to help them reduce their required down payment. One economist responding to the survey data said consumers need a loan officer who will ask them a lot of questions to determine which mortgage is best.