Nearly three-quarters of people in the market to buy their first newly built home worry they won’t qualify for a mortgage, according to a news Homes.com survey.
For its New Construction: What Buyers Want Survey, Homes.com partnered with YouGov in May to poll more than 1,000 people age 25-plus who have incomes of at least $50,000 and either purchased a new home in the past two years or plan to buy a newly built property in the next two. See the full methodology.
Among the people who haven’t bought a new home yet, including first-time buyers and those who have owned a home previously, 62% said they were worried about qualifying. Meanwhile, 49% of those who recently bought a new house recalled having this concern.
“The [first-time buyer] figure isn’t surprising, because it’s getting harder and harder for someone who’s never bought a home to buy one,” Susan Williams, sales vice president for Richmond, Virginia-based builder HHHunt Homes, told Homes.com. “There’s the double whammy of price inflation and interest rates; even for someone who’s been saving and has a good job, the numbers may not work.”
The biggest issue by far for both current owners and intenders is mortgage rates. Seventy percent of people who intend to buy homes are concerned about rates, and 66% of those who already purchased said they were. The intenders are also more concerned than current owners were about how the process works and what they can afford.
Mortgage rates, inflation weigh heavily on buyers' minds
When asked what economic factors carried the most weight in their decision to buy a home, respondents were likelier to list mortgage rates, inflation and overall economic uncertainty. U.S. government tariffs and job market conditions also figure in many buyers’ thinking.
Surprisingly, only 8% of people looking to buy in the next two years listed student loans as a concern, even though some new buyers may owe payments that were paused during the pandemic.
The expenses that come with owning a home also weigh heavily on their minds. Property taxes top the list of expenses buyers worry about, according to the survey. Many also lose sleep over the cost of homeowners insurance and utility bills.
Builders have an important role to play in easing homebuyers’ fears about these and overall costs, Williams said.
“We train all our sales team members in financing because we want to run numbers with buyers before they sit down with a lender,” she said. “This is definitely not a time when the market is generating confidence in buyers. It doesn’t necessarily mean you’re making a bad decision financially; you just need to weigh out everything.”
This is how buyers paid/plan to pay
It turns out that cash is not king when buying a new home. It's mortgages.
The majority (61%) of the survey respondents said a mortgage was the way to go, and only 1 in 10 received financing or would elect to receive it through the builder.
So where would they turn? A majority of the survey respondents said they preferred traditional banks or credit unions for their loan, but 2 in 10 selected online lenders.
Some buyers consider financing from large builders who offer loans through their own in-house lenders, and others that partner with lenders to offer incentives. A common incentive is a mortgage buy-down, enabling a buyer to get a below-market rate. Some builders offer help with paying closing costs or for new appliances.
“About 90% of our buyers right now end up using one of our lender partners,” Williams said. “We do offer incentives, larger right now than they were a few years ago. We sell that as a way to make the process more turnkey, where we can control the lender part even though they’re not part of our company.”