How Americans shop for home mortgages evolved greatly in four short years, something not easy to see in the bustle of everyday business. A survey earlier this year by Fannie Mae points out just how much has changed in such a short amount of time.
In first quarter 2020, the government-sponsored enterprise found that 60% of homebuyers surveyed obtained their mortgage exclusively in-person or by phone. Another 33% used a hybrid approach both online and working with a representative. And 7% conducted the entire financial transaction online.
Fast forward to today and 55% of all homebuyers used the hybrid approach, the most popular way of obtaining a mortgage, according to Fannie’s survey conducted in first quarter 2024. The number of people who worked with a mortgage originator in person or on the phone dropped to 33%.
Curiously, the 7% who obtained a mortgage entirely online in 2020 jumped to 12% in 2021 but hasn’t really budged since then. It was still 12% earlier this year.
“Our prior research has shown that while, in general, consumers want to leverage technology to speed up the mortgage process, they also seek a ‘human touch’ as they navigate this very personal and significant life decision,” said Li-Ning Huang, Fannie’s principal of market research, in an email. “In other words, most consumers prefer a hybrid approach.”
That most recent survey was conducted from January through March 2024 with 1,201 homebuyers who purchased mortgages last year that were acquired by Fannie Mae. The survey offers all sorts of glimpses into consumer behavior using digital technology.
For instance, age didn’t really matter for interest in using a more or fully digital mortgage process up until age 64. In fact, the age cohort between 45 to 64 were more interested in a digital approach (53%), compared with the age groups of 18-34 (44%) or 35-44 (49%). The number of people very interested in a more or fully digital mortgage process only drops significantly for people older than 65 (just 36%).
Racial attitudes on the same question are very similar. Whites (47%), Blacks (48%) and Asians (51%) all expressed that they were very interested in a more or fully digital mortgage process. Hispanics dropped to 42%, but that could have been because of a low sample size, according to the survey.
Overall, 90% of homebuyers expressed very or somewhat more interest in a more or fully digital mortgage process. That compares to just 63% in 2021. Homebuyers cited several perceived benefits of a digital approach to obtaining a mortgage. Those reasons included shortening the mortgage process (75%), making the process easier (71%) and reducing paper usage (59%).
Of all the steps in purchasing a home and landing financing, homebuyers pointed only to one where they preferred being in person — that’s touring the home. A full 90% of homebuyers wanted to walk through the house before the sale. Just 7% felt they could do that mainly online. By comparison, 71% felt they could select a lender mainly online.
In this year’s survey, just 34% of homebuyers said they were asked to provide access to their bank accounts online for verification during the mortgage process. Of those, 30% of the homebuyers agreed and 4% declined. About two-thirds — 65% — were not offered the option.
“We expect that more lenders will begin to see the benefits of using the borrower’s bank account data to digitally verify their assets, as well as income and employment, and that over time this will become the industry norm,” Huang said.
Of those consumers who declined, 51% said they were concerned about data security. Another 30% said they did not want to provide their bank account username and password. And 10% said their bank funds were in multiple accounts.
Of the people who gave permission to access their bank accounts, 51% said they would do the same in the future. That also means that 49% would decline doing so in the future.
Huang and Smith hypothesized that the consumers may not be aware of the benefits of doing so. They also noted the consumer may be worried about data and privacy and also wanted greater control over their own data. Consumers also apply for mortgages infrequently meaning that uploading documents wasn’t considered onerous.
“Our own data shows that when borrower income, employment and asset data are verified automatically during the underwriting process, there is less likelihood that a defect will be found on the loan after it closes,” said Brooke Smith, Fannie’s senior manager of single-family digital solutions, in an email. “In turn, this may help reduce the cost of originating mortgages for lenders.”
Additionally, when a lender works with a borrower to order an asset verification report, this enables Fannie Mae to enhance the borrower’s credit assessment using data not traditionally included in a credit report.
“This may allow qualified borrowers with limited or no credit history to receive approve/eligible recommendations via (Fannie Mae’s Desktop Underwriter),” Smith said. One of the reasons that the survey is so illuminating is because it closely compares consumer attitudes in separate surveys over a relatively short period. While purchasing a package from Amazon has been daily life for years, consumers appeared in the past to be hesitant to make major purchases such as mortgages online — at least until recently.
