3 Essential Details About the Home Financing Process

by Peter Thomas Ricci

There were a number of interesting details regarding how homebuyers financed their purchases in 2013.


The world of home financing has undergone some radical changes in the last 10 years, with consumers experiencing both the loosest and most restrictive credit environments in decades.

But now, with the housing market on relatively firm footing, what details define housing finance? To find out, we took a look at NAR’s 2013 Profile of Home Buyers and Sellers, and uncovered the following five trends:

1. A Fixed-Rate World – The fixed-rate mortgage in 2013 remained the overwhelming choice among homeowners, with a whopping 95 percent of entry-level buyers opting for the financing option. Similarly, the FHA still has an abnormally large footprint, with 40 percent of those same buyers choosing the agency’s low-downpayment loans. Those two stats all lead back to one central point – the government is still largely directing the nation’s home financing marketplace, either directly via the FHA, or indirectly via the fixed-rate mortgages that Fannie Mae and Freddie Mac make possible with their guarantees.

2. A Tricky Mortgage Process…Really? – The tight lending process has been one of NAR’s more consistent talking points as of late – in fact, the headline to their story on the 2013 Profile reads “Home Buyers and Sellers Survey Shows Lingering Impact of Tight Credit” – but the survey results were a bit more nuanced. Just 16 percent of homebuyers reported the mortgage process as being “much more difficult” than they had expected, compared to 24 percent who found it “somewhat” more difficult. So even when you compare those two stats, a majority of homebuyers still did not have issues getting their mortgage.

3. Student Loans on the Home Front – Twelve percent of homebuyers reported that saving for their downpayment was difficult, but it was the reasons behind those difficulties that were most shocking. The No. 3 (car loans) and No. 2 (credit card debt) reasons for those difficulties were hardly surprising, but the No. 1 reasons, cited by 43 percent of those homebuyers, was student loan debt. We’ve written before on how effective student loans have been at dissuading consumers from homebuying, and these survey results offer only the most recent indicator.

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