Mortgage application process just as stressful — or worse — than buying a home, study finds

A new report from Mastercard-backed data company Finicity has shed light on an uncomfortable perspective for the lending industry: As frustrating as the homebuying experience can be in today’s torrid, ultracompetitive marketplace, applying for a loan may be even worse.

That’s the big takeaway from the firm’s “High Demand, Higher Hurdles in the Mortgage Market” report, which revealed that 89% of respondents to a survey believe that the loan application process was just as stressful or even moreso as buying a home. To zero in on a current picture of both buying and financing, the survey was focused on the consumer experience of homebuyers and borrowers since April 2020.

“Buying a home should be exciting, not frustrating. said Andy Sheehan, president and COO of Finicity. “And the loan process can be a seamless end to the home buying or refinancing experience. In this digital era, mounds of paperwork and lengthy processes should be a thing of the past. Many lenders do offer a partial digital loan process today, but that doesn’t mean that the customer experience is always better. Friction in the process can still remain.”

Indeed, many of the pain points identified by participants in the study are tied to consumer perceptions that parts of the lending process are behind the times compared to other financial transactions. Seventy-two percent of respondents, for example, were surprised or very surprised at the volume of paper processes that still take place in various stages of acquiring a mortgage.

The lack of speed in the mortgage procedure — often owing to outdated methods — was also a big negative for survey respondents. More than half of total respondents said it took between 30-60 days from application to close, with 16% saying it took even longer than that. That timeline, Finicity said, could be significantly truncated via digital consumer permissioning of borrowers’ financial data. Just 12% of survey respondents indicated that they would be uncomfortable issuing such digital permission to a lender, and borrowers who used digital verifications were half as likely than those who didn’t to say that the loan process was the most stressful part of finding and acquiring their new home.

And as previous retention surveys have found, dissatisfaction that mounts during the initial loan process can linger over the life of a loan. In Finicity’s study, 64% of respondents indicated frustration with the loan process during the purchase leading to hesitation in refinancing.

“Lenders will need to continue to refine the digital mortgage process and improve functionality to ensure an intuitive and efficient customer experience,” Sheehan said. “Open banking data provides digital verification of assets, income and employment that can drive satisfaction, reduce risk and costs in the short term, and increase customer loyalty in the long term.”


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