By Nick Timiraos
A new survey shows that Americans’ confusion over mortgage applications has become one of the most challenging aspects of buying a home today.
Nearly one-third of respondents said that understanding the mortgage process was the most difficult step in buying a home, according to the survey conducted by MortgageMatch.com, a unit of Move Inc. That was higher than the share of borrowers who said getting approved for the mortgage (23%) or negotiating the home purchase price (25%) was the most difficult step in buying a home.
The majority of buyers said that finding the right home (54%) was the hardest part of the buying process, while 37% of borrowers said saving for the down payment was the most difficult step.
The survey “clearly points to the fact that borrowers want a process that’s easy to understand and follow,” said Sue Stewart, senior vice president at Move Inc.
While anyone who applied for a loan during the middle of last decade probably found that the process was a breeze, lenders have ratcheted down not only their lending requirements since the collapse of the housing market four years ago, but they’ve also become far pickier about documentation requirements.
Nearly 23% of those surveyed said that the mortgage process was challenging because documentation requirements from lenders kept changing, compared with 7% of borrowers who said it was hard to qualify because their credit score wasn’t strong enough.
Among borrowers who are interested in buying a home, the survey found that 20% are primarily interested in buying an investment property, up from less than 6% in March 2009.
The survey also asked respondents what they believed should be President Obama’s top housing-market priority for 2011. Some 28% of borrowers said keeping interest rates low was their top priority, followed by 27% who said the top priority should focus on helping troubled borrowers avoid foreclosure.
Another 14% of borrowers said that the focus should be on keeping the federal mortgage-interest tax deduction at current levels, up from 9% in October 2009. Nearly 13% said there should be more affordable mortgage credit available, while 11% said the top priority should involve helping first-time home buyers to purchase a home.
The survey was based upon 2,000 phone interviews conducted from Jan. 7-9 and Jan. 14-16 by GfK Custom Research North America.
Readers, have any of you tried to buy or refinance in the past year? If so, what have you found most vexing about the process?
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I am in the biz, have been for 11yrs, I saw no paperwork requirements and now tons of paperwork requirements. Mostly with people who own businesses. Some of the requirements are pretty stiff and I am mostly in agreement with the requirements since I have no desire to see anyone stuck with a loan they cannot repay b/c the taxpayer (me included) ends up footing the bill. The reason the process is confusing is b/c people are not informed consumers especially if you are using anytime of online bank or local bank. Mortgage banks or brokers are the way to go, that is where most of the educated people hang out in the industry. David J you are one of the misinformed or uninformed consumers. By law your GFE estimate cannot really change at all, it needs to be identical to the HUD-1 settlement statement. Your rate cannot change or the loan will not close unless there is a valid reason for the change in rate (ie different appraised value than originally entered which would result in LTV change, change in desired loan product-20yr to 30yr etc). Overall our industry sucks because there is now no more common sense underwriting-can the person repay the darn loan-YES OR NO. It is now based on credit algorithms and all kinds of other nonsense. The most amazing thing to me is, NO ONE ever asks at all if the loan makes financial sense for an individual. The lending community has 0 fiduciary responsibility. Bring that into the game, limit the Federal Reserve’s ridiculous amount of power, restore common sense underwriting and the lending community might regain the respect it had 50 years ago. http://lehighvalleyhomes.tv
My only real complaint about the re-finance I am currently going through is that the “Good Faith Estimate” (GFE) seems to be “CYA” document more than anything else - to this point the agent I am working with is basically saying that I should just wait for the HUD-1 document that I will sign at closing (and giving me an reasonable upper-limit that is half what the GFE estimates for closing.
Coming from a systems background what I am seeing is little incentive to re-imagine the mortgage application process since people are shopping for mortgages based upon price factors alone and will simply deal with whatever process the cheapest lender has in place. It is functional and likely no-one is going to walk away because of the paperwork if they can get a good rate - they will vent and rant but still end up closing.
As for “repayment risk” documentation from my vantage point too much emphasis on paperwork can be very bad. At the end of the day an individual or committee should sit down with the borrower and have the borrow convince them that the loan is a good risk. The borrower can present whatever documents and arguments deemed necessary then the lender can verify and question as desired before making a final decision and go/no-go (or modifications) to the loan terms. Cutting out this “dialog” and simply saying “give me these numbers” makes the process to mechanical and thus the borrower end up feeling neglected and powerless. Especially for borrowers, like myself, with circumstances that do not include a 9-5 job and regular income.
I am a practicing Professional small Regional Mortgage Banker - for 30 year. The Federal Agencies and they are many are conflicted in their Regulatory Practices. Simply put, the pressures of regulatory compliance are hindering the recover of the housing market. The latest wave of legislated regulation is the Mortgage Origniators namely your friendly Mortgage Loan Officer, Mortgage Branch Manager, Mortgage Brokerage Owner, and Mortgage Banker are on April 1 to have their compensation governed by law Federal Law. What’s more, the same group of we Mortgage Originators are required to be part of a National Registry. The only other collection of people required to be on a National Registry is Sex Offenders. The fox left the hen house 3 years ago, enough with the smothering law that even the governing bodies aren’t on pace to comply - they are all protesting in Washington for higher pay!
Of course that’s just my opinion, I could be wrong.
To What?
What you missed is that the suvey might have allowed the respondents to select multiple responses for the same question.
I think that we can all agree one one thing, every fee that they charge you for every little things is just a legal way to extort you. Mafia has moved on from garbage and construction to mortgages. It’s a legal racket.