Making the Mortgage Picture Clearer for Buyers

A substantial number of would-be homebuyers lack the financial education to navigate the homebuying process, according to a recent survey from Sente Mortgage. And according to Sente Mortgage CEO Tom Rhodes, it’s up to the industry to step in and provide potential homebuyers with the education they need.

In fact, the survey found that consumers are more likely to spend a considerable amount of time buying a TV than a mortgage.

“The homebuying process is complex, and it’s clear that for many of today’s consumers, gaps in financial education are leading to some risky purchase behaviors,” said Rhodes said. “Unfortunately, many of the most valuable resources available to buyers go grossly under-utilized, but with the right guidance and support, owning a home can be one of the biggest contributing factors to long-term financial success. Our goal is to help bridge that education gap to enable confident, lower risk home purchase decisions and ultimately give everyone that chance.”

Nearly half of the 300 survey respondents (44 percent) said that buying a home was so stressful and intimidating that choosing a career or the next president was less stressful. While 92 percent of respondents said they believe owning a home is a better long-term financial decision than renting, only 30 percent said they knew where to start the homebuying process. Approximately 59 percent said they had the financial education, but 20 percent said they did not feel like they were prepared to make the decision.

“We have customers who get that owning a home is a better decision, but after that they have no clue,” Rhodes said. “In many senses, this is a bit of a wake up call. We have customers that have basic needs that we're not taking care of. Our marketing messages may be very transactional, and what this is saying to me is that people want something more than that. They want education, they want a relationship, they need to be taught what they don't know. I think consumers don't want to play in sandboxes that they don't know anything about. It's uncomfortable and they're worried about being taken advantage of. To me, one of the background challenges is that people want to buy a home, they don't want a mortgage. We have a product that helps facilitate the big thing. The thing that people want. But it's not something they're seeking out, and further, we haven't done a good job of educating them on how to be prepared for it.”

In order to better educate potential or future homebuyers, one of the things Rhodes believes the industry can do support financial education programs in schools so that kids are better prepared when they graduate. Another possibility is a standardized education process.

“American consumers aren't going to spend a lot of time worrying about getting a mortgage when they’ve got a lot of things to worry about,” Rhodes said. “When they're finally ready, we have to get them up speed as quickly as possible. Maybe what's required is that we begin to develop a consistent educational message. That's something that could be done more broadly by the industry as a whole.”

Of the millennials surveyed, nearly one-third (30 percent) said they don’t know how much they can afford when it comes to a mortgage and one-quarter said they don’t understand the long-term financial impact of purchasing a home. Half of millennials said that concerns over student debt had delayed major financial decisions, according to the survey.

Despite the magnitude of the decision of buying a home, the survey found that consumers often spend more time preparing to make much less impactful decision such as buying a TV or planning a vacation. Half of respondents said they had spent “considerable time” planning a vacation compared to just 29 percent for a mortgage. More respondents said they were more likely to spend considerable time shopping for a TV than a mortgage (32 percent compared to 29 percent).

“I recently bought a TV, and I spent a lot of time wondering about every frame, refresh rates, and resolution, and I'm in the mortgage business, and I thought, 'Maybe I don't spend as much time as I do buying a TV,’” Rhodes said. “Consumers aren't orienting around the thing that they need to, which is this is a really big deal, and we need to help them understand what they're committing to. This sounds weird, but you have a relationship with your TV. The size, the picture, the sound. You have a somewhat intimate relationship with the television. We have promoted ourselves as so transactional that people don't see the relationship to be had. That's a really missing element in our industry and in an area where there needs to be a real focus—this is as important as a relationship as someone has with their TV.”