High costs, complex mortgage processes, and lack of confidence stall homebuying
Amid rising interest rates and soaring home prices, many aspiring homeowners are hesitant to enter the housing market due to a lack of confidence and fear of making costly mistakes, a new Bank of America report revealed.
The Homebuyer Insights Report (HBIR) found that 41% of prospective buyers feel ill-equipped to navigate the complexities of securing a mortgage, understanding interest rates, or deciphering homebuying terminology. More than half of the respondents (53%) admitted feeling unsure about available grant programs.
The homebuying process can be overwhelming, especially for first-time buyers, according to BofA’s report. Many feel unprepared to handle the financial aspects and the jargon associated with mortgages and grants.
This lack of confidence is exacerbated by current market conditions. Higher interest rates and inflated home prices have deterred many would-be buyers, with 57% of respondents unsure if now is the right time to buy, up from 48% last year.
Despite these challenges, the desire for homeownership remains strong. 76% of prospective buyers still plan to purchase a home within the next five years, and 81% see renting as a temporary situation.
"Given the highly competitive homebuying market, renters are unsure whether now is the right time to buy," said Matt Vernon, head of consumer lending at Bank of America. "That said, our research continues to show that the vast majority of prospective homebuyers overwhelmingly feel buying a home, now or in the future, is the best decision for them in the long run."
The report also highlights the emotional toll of renting for many. 70% of renters expressed concerns about not building long-term equity, and 72% worried about the impact of rent increases on their finances.
In contrast, 89% of homeowners reported that owning a home brings emotional fulfillment rather than added stress. However, baby boomers are an exception, with 80% preferring to rent due to the freedom from property maintenance and financial burdens.
Read next: How can loan originators guide borrowers through a competitive market?
Vernon emphasized the importance of seeking professional guidance to address the knowledge gap and build confidence among aspiring homebuyers.
"Grants are a valuable resource to help bridge the gap between your savings and a downpayment," Vernon said. "Meeting with a lending specialist can be a great first step to see if you qualify for assistance programs, such as Bank of America's down payment and closing cost grants."
The report also revealed that even among current homeowners, there’s a sense of missed opportunities. Two-thirds (66%) admitted they would have done something differently when buying their first home, with saving more for a down payment being the most common regret.
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