A new study by J.D. Power found that first-time home buyers report challenges with understanding the mortgage process and the options that are available to them.
Among survey respondents purchasing a home, 58 percent are first-time home buyers. Lack of experience among these customers and uncertainty about the process may influence how they first inquire about a mortgage, with 48 percent heading to a lender’s local office to meet with a loan representative in person and receive personalized advice.
Key findings from the study include:
- Overall customer satisfaction with the mortgage origination process averages 786 (on a 1,000-point scale) in 2014.
- More than one-third (35 percent) of all mortgage customers—and 43 percent of first-time home buyers—indicate they do not completely understand the process, resulting in an average decline of 179 points in overall satisfaction.
- The majority (54 percent) of first-time home buyers indicate they don’t fully understand the different loan options available to them. Only 41 percent of first-time buyers and 56 percent of experienced mortgage customers indicate their representative completely explained the types of loans, terms, special programs, fees and options to reduce their down payment.
- Consistent communication is another important part of a good borrowing experience. Satisfaction falls by 236 points when loan representatives fail to call customers back as promised.
- The closing experience is often confusing for customers. Among first-time home buyers, 44 percent indicate that the closing agent didn’t completely explain all of the closing documents vs. 26 percent of experienced customers. Overall satisfaction declines by an average of 144 points when lenders fail to effectively communicate loan documents and terms.