A widely acknowledged but difficult to reverse decline in financial literacy among U.S. consumers likely contributes to higher loan production costs, according to newly released results from a homebuyer survey.
The survey underscores how mortgage and homebuying myths can ultimately exacerbate existing barriers to access, while sometimes erecting novel challenges.
Even as downpayment programs proliferate amid high home prices and elevated mortgage rates, awareness of low- and no-downpayment loan options “remains limited,” says Veterans United Home Loans, a large national lender and servicer that commissioned the survey, which polled a blend of 400 U.S. military veterans and nonveterans who intend to purchase a house with three years.
“The reality is that loan programs are often more flexible than people realize, especially when it comes to credit scores, downpayments and interest rates,” noted Chris Birk, vice president of mortgage insight at Veterans United, in a statement accompanying the findings.
Nearly one-third of respondents said they thought they could not buy a home without a downpayment of any size, while 46% reported thinking that conventional loans underwritten to Fannie Mae and Freddie Mac lending guidelines required downpayments of more than 5%.
Conventional loans can require as low as 3% downpayments for qualified first-time buyers. Loans insured by the Federal Housing Administration require just 3.5% down.
Concerning mortgage rates, the survey found that 61% of respondents believe the federal government dictates rates, while 66% think the Federal Reserve sets mortgage rates, “revealing a fundamental misunderstanding of how borrowing costs are actually determined,” said Monday’s release.
“In reality,” the report continued, “lenders set their own rates, while the Fed’s policies influence broader economic conditions that can indirectly impact mortgage pricing.” Veterans United is the largest U.S. lender of VA loans, which are no-downpayment mortgages insured by the Department of Veterans Affairs, accessible to U.S. veterans and select family members as a benefit from their service.
The attention on homebuyer education comes amid a push by Veterans United, Guild Mortgage and other members of the Community Home Lenders of America (CHLA) to formally push the Trump administration to make reinvestments in financial education and homebuying literacy a top national priority.
Citing high downpayment requirements it described as “the single greatest Gen Z homeownership challenge,” the CHLA wrote in a white paper published last Monday that the federal government could help avert “an unprecedented intergenerational wealth imbalance” by requiring at least two years of financial literacy courses in public high schools and reinstating funding for homeownership counseling that has been slashed under the second Trump administration.
A recently proposed White House budget for fiscal year 2027 for the Department of Housing and Urban Development (HUD), which administers the FHA insurance program, once again requests zeroing out HUD’s housing counseling funds, a move that Congress ultimately rejected in HUD’s approved 2026 budget.
Many low-downpayment or non-downpayment loan programs nevertheless require homebuying education or counseling as a stipulation of receiving often forgivable downpayment funds. The CHLA also says the federal housing agencies should publish and distribute a complete homebuying guide surveying a range of homeownership and mortgage topics.
The Veterans United survey findings are situated within the context of yearslong purchase affordability challenges making homebuying inaccessible to many typical earners since 2020, fueled by the combination of rapid home price appreciation, elevated borrowing costs and rising ancillary ownership costs like property taxes and homeowners insurance.
Ongoing affordability constraints are structurally entrenched but nevertheless loosened nationwide to their best levels in four years prior to the start of the Iran war on Feb. 28.
Surging mortgage rates reversed seven months of improving mortgage affordability in the first month of the conflict, as typical new mortgage payments rose 3.4% from February levels to land at $2,131, just 2% lower than a year ago, according to the Mortgage Bankers Association.
Average mortgage rates on typical 30-year home loans declined from around 6.5% at the end of March to between 6.3% and 6.4% through much of April, well above the 6% threshold where mortgage rates spent most of January and February.
Experts tell Scotsman Guide that improvements in homebuying affordability attributable to falling borrowing costs may be limited for the foreseeable future, with forecasts of protracted economic fallout from the war raising the floor for mortgage rates to the higher end of a 6% to 6.5% range for the rest of the year, pending new developments.
Despite the challenges, respondents to the Veterans United survey indicated that attaining homeownership remains a clear goal for many consumers. Nearly 9 in 10 respondents said owning a home is “one of the most important goals” in life.
