Even in light of research form TD Bank that found 54% of homebuyers report that now is a good time to buy a home, those same respondents also reported that the homebuying process was a major form of stress in their lives.
This information, which comes from TD’s 2023 Mortgage Service Index, found that 64% of respondents indicated their most recent homebuying was a stress inducing process and asked further questions about their perceptions on the current real estate market. The survey contacted more than 1,813 households who purchased a home with a mortgage in the last 10 years over a 10-day period in May. The survey was conducted by Big Village, who is an insights and global research analytics business.
The survey, unsurprisingly, found that inventory levels and interest rates were big pressure points for many respondents. Twenty-four percent cited home inventory challenge and mortgage rates as the leading factors that negatively impacted home purchasing decisions. Additionally, a majority (68%) of homebuyers cited shifting interest rates over the last year as a factor in their decision to buy. As inventories in many markets remain inconsistent, almost a third (29%) purchased newly constructed homes.
"The Federal Reserve has increased rates every time it has met for over a year, so the pause on rate hikes last month and the fact that we've likely reached a near peak may offer some respite for buyers," said Steve Kaminski, Head of U.S. Residential Lending for TD Bank. "But given the competitive market and already high home prices, it's understandable that the headache persists for many looking to purchase a home. If inflation continues to tumble and the economic outlook improves, we hope to see the longer end respond favorably and assist in more affordable options. The key to alleviating that stress is speaking to a knowledgeable, trusted lender before beginning a search to ensure buyers are looking within their budget and tapping into all the resources that can save them money."
Despite these inventory and rate challenges, three-fourths (75%) of those surveyed said that the mortgage process did not prevent them from closing on their home within their desired time frame.
When it comes to navigating the overall homebuying process, sentiment varies between generations:
- Gen Z respondents (81%) and Millennial respondents (71%) were most likely to find the process stressful.
- Baby Boomers, on the other hand, found the process of purchasing a home to be a less taxing experience, with 47% of these respondents indicating they didn't find homebuying to be stressful.
- While an overwhelming majority of Millennials (84%) and Gen Z (90%) respondents reported interest rates were a factor in their decision to buy, the majority of Baby Boomers (58%) said fluctuating interest rates were not a factor in their decision.
"Right now, it's important for buyers that are entering the market to focus on what they can control, such as the fundamentals of preparation," said Kaminski. "This includes meeting with a mortgage professional early in the process, knowing your financial position, and gathering documents early, which can help ease some of the concerns around price and rates. Connecting with a knowledgeable lender to understand requirements and the process can also help buyers learn about affordable product options that can assist with payments, another potential de-stressor in the process."
While the mortgage process remains intimidating for some, many homebuyers are also comfortable seeking guidance and tapping into automation, to perhaps simplify the experience:
- A majority of homebuyers (95%) shared they have sought information or opinions on products and services offered by different lenders, with over half of respondents (54%) indicating they talked to a realtor in seeking additional information.
- As automation in the mortgage lending process also continues to become more prevalent, 68% of homebuyers say they are very or somewhat familiar with automation being used by some banks to streamline the lending process.
- Eighty-five percent of those with any familiarity would like to see at least some automation in the process.
As new programs have come along, the traditional down payment of 20% or more has become less of a priority for homeowners as 65% of borrowers reporting they were aware of these programs or used them during their homebuying process.
But the downpayment isn’t the only charge borrowers must cover during the homebuying process—40% of respondents spent an additional $2,000-$5,000 in unexpected changes, while 10% paid over $5,000. This reinforces the importance of leaning on experts like realtors and loan officers who can provide valuable insight on the total cost of homeownership and affordability programs that allow for down payments as low as 3%, saving buyers money on out-of-pocket expenses.
"Purchasing a home is one of the paths to building generational wealth for many, and trusted lenders are focused on making the process more accessible," said Kaminski. "As factors like uncertain economic conditions, low home supply and fluctuating interest rates continue to make potential homebuyers feel sidelined, it's important for them to know that lenders and many home professionals are continuing to evaluate processes and products to ensure homeownership is more equitable and inclusive."