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Success In The Mortgage Process: Are Borrowers Feeling Confident?

Sep 5, 2023



According to the National Survey of Mortgage Originations (NSMO), 59% of borrowers said they were somewhat to not at all familiarized with the mortgage process. Buying a home is one of the largest purchases a person will ever make, which is why it’s important to feel confident when embarking on every step of this journey.

We took a close look at borrowers who were familiar with the mortgage process and those who weren’t, so we could identify some key differences between the two groups. We analyzed the NSMO to compare the home buying resources that borrowers used to educate themselves when taking out a mortgage for their primary residence. In addition, we looked at what was important to these borrowers when choosing a lender and the steps they took to understand more about their individual journey before starting the mortgage process.

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59% Of Borrowers Said They Were Somewhat To Not At All Familiarized With The Mortgage Process

Many steps are involved in getting a mortgage and eventually buying a house. These steps include everything from having a good credit score to getting mortgage preapproval to knowing how much money is needed for a down payment and closing costs. Fully understanding every part of this process can be hard, especially if you’re a first-time home buyer.

Infographic breaking down the levels of familiarity of parts of the mortgage process into percentages.

According to the NSMO, 19% of respondents said they’re not at all familiar with the mortgage process. At the same time, 40% felt very familiar or somewhat familiar with the process.

The data also shows that 75% of borrowers were very familiar with their credit history or credit score as it pertains to the mortgage process. Perhaps this familiarity stems from credit scores typically being discussed more often since they’re linked not only to the mortgage loan process but they’re also important when applying for credit cards and other loans.

Understanding basic concepts like down payments, mortgage approval, closing costs and interest rates can give potential borrowers a better idea of where they stand financially – so they can be approved for a mortgage and also afford one. Such knowledge is especially important for first-time home buyers who’ve never been through financial discussions of this nature.

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Resources Used To Navigate The Mortgage Process

Since the mortgage process has many moving parts and pieces, borrowers should seek out knowledgeable mortgage resources designed to help them feel more educated and comfortable.

Borrowers who reported being not at all familiar with the mortgage process were more than twice as likely to rely on friends, relatives and co-workers as those who were very familiar with the process.

Infographic breaking down the percentage of people leveraging each resource by familiarity with the mortgage process.

It’s also interesting to note that 73% of borrowers who felt unfamiliar with the mortgage process reported relying on their mortgage lender the most. Meanwhile, 44% of borrowers not familiar with the mortgage process relied on their real estate agent or builders.

Mortgage lenders and real estate agents are great resources for potential borrowers as they embark on a journey to homeownership. Thanks to their plethora of experience with the real estate market and house hunting, real estate agents are equipped to provide helpful guidance for borrowers. Meanwhile, mortgage lenders can explain the steps involved in getting a loan and provide in-depth details and definitions intended to help first-time borrowers understand every step of the way.

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73% Of Borrowers Said A Lender’s Reputation Was The Most Important Factor When Choosing A Lender

Lenders play a huge role in the mortgage process since they’re responsible for loan approval, and this is why choosing a lender should be done carefully. According to the NSMO, 73% of respondents said their mortgage lender’s reputation was the most important factor when choosing that lender.

Infographic showing factors considered when choosing a lender in percentages.

A reliable lender, once chosen, will act as another helpful resource. Now that we know potential borrowers often rely on people like family members, friends and co-workers for information about the mortgage process, it seems safe to assume that borrowers can learn about different mortgage lenders from those same resources.

For example, let’s say your co-worker just bought a single-family home and told you their mortgage lender was wonderful throughout the loan process. Let’s suppose this same co-worker enjoyed amazing customer service from the lender, who took great care to address the needs of their specific financial situation. Learning all this might prompt you to research this lender by reading reviews, checking out the lender’s loan offerings and maybe even speaking with a representative to gather some additional information. Making time for this research will help you choose the right lender for you and your unique situation.

Of course, other factors are also worth considering before choosing a mortgage lender. For example, 41% of potential borrowers in this survey said it’s important that a lender has a paperless online mortgage process. This is a big selling point to borrowers because it can make applying for and ultimately managing a mortgage more convenient.

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Setting Yourself Up For Success

Preparing for the mortgage process begins with several tasks, and one is establishing a good credit score. Our analysis indicated that 75% of respondents felt very familiar with their credit history and credit score as it relates to the mortgage process. A good credit score can help you get preapproved by a lender and influence the lender’s decision on how much house you can afford, which dictates the size of your mortgage loan.

Infographic breaking down the level of familiarity people have when it comes to steps taken before making an offer, in percentages.

Mortgage preapproval will help you determine how much money you can borrow to buy a house. Lenders will be checking your credit score, income and assets to figure out what type of loan will work best for your financial situation and goals.

You might also hear the term mortgage prequalification, which is similar to mortgage preapproval but usually isn’t as accurate. With a prequalification, lenders are only providing you with estimates based on limited information they have about you and your financial situation. Lenders also won’t make a hard pull on your credit with this kind of initial review.

An essential first step to the mortgage process is finding out where you stand financially – whether that be from a mortgage preapproval or prequalification – because this information can change how you approach the rest of the home buying journey.

The Bottom Line

With a majority of adults feeling unprepared for the mortgage process, it’s important to assess and determine whether you feel ready to buy a home or need to take some time to gain more knowledge. If the latter is true, you may want to learn more about mortgage preapproval, down payment requirements, minimum credit scores and how lenders can help. Using the resources available to you is a simple way to enter the mortgage process confidently and ready to become a homeowner.

If you’ve decided to take the next step, start your mortgage application today.

Note: The opinions and analyses contained herein are solely of the users/authors of any data analyses or papers, and the FHFA cannot and does not attest to nor vouch for the quality, accuracy, or timeliness of the data, or analyses derived from these data after the data has been retrieved from FHFA.gov.

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Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years. Miranda is dedicated to advancing financial literacy and empowering individuals to achieve their financial and homeownership goals. She graduated from Wayne State University where she studied PR Writing, Film Production, and Film Editing. Her creative talents shine through her contributions to the popular video series "Home Lore" and "The Red Desk," which were nominated for the prestigious Shorty Awards. In her spare time, Miranda enjoys traveling, actively engages in the entrepreneurial community, and savors a perfectly brewed cup of coffee.