Homebuyer confusion may be driving canceled mortgage applications

Cotality’s “From House to Home” report included a survey of 1,000 recent and prospective U.S. homebuyers. It explored the dichotomy between markets relying on speed and buyers relying on timing. Ultimately, it found that homebuyers care more about timing and confidence as 43% felt speed was critical when finding a home, while 41% said the same about securing a mortgage.

Anand Srinivasan, Cotality’s head of research and development, said that delivering a speedy loan is about walking a fine line of executing personalized timing and information delivery for different generations.

Gen Zers, for example, tend to start the application process with confidence but lose it quickly as they are often stressed by insurance and closing costs. Srinivasan said this was a surprising discovery, given the digitally-savvy nature of the generation.

Baby boomers, on the other hand, are the least overwhelmed and most trusting group, relying heavily on human experts.

The report highlights a widespread confidence gap among the 1,000 people surveyed. Only 12% of buyers said they felt confident starting the process, while only 8% felt assured after finding the right home. Thirteen percent said they didn’t feel confident until the moment they closed. And only 7% described the entire experience as straightforward.

Comfort and timing emerged as stronger predictors of loyalty than convenience, and these factors kept buyers on track to finish their applications. Buyers who felt comfortable throughout the process and built up trust with their agent or lender were far more likely to use that person again.

“Comfort is the factor that keeps home buyers coming back again and again,” Srinivasan said. “You have to microdose [Gen Z] with the right amount of information at the right time. You do it too quickly, you’re noise. You do it too late, you’re irrelevant.”

Some lenders have said that while Cotality’s data is from a year ago, some of the same issues persist and are just as relevant now.

Phil Crescenzo, the Southeast division vice president for Nation One Mortgage Corp., said that a lot of application withdrawals have to do with trigger leads.

“Often, an unsuspecting consumer may start or open an application because they are contacted immediately after the application. [It’s often] a solicitation made to appear as the institution they are working with. This would result in an unexplained number of withdrawn applications,” Crescenzo said.

In the wake of the Homebuyers Privacy Protection Act (H.R. 2808) advancing to President Donald Trump’s desk, Crescenzo thinks the confusion will dissipate.

“Now that the law protecting homeowners’ information has passed, this should not allow homebuyers [to be] abused by marketers or uninvited spam calls.”

Factors leading to ghosted applications

Though Cotality’s survey pulled data from last year, loan officers and other mortgage professionals are still reporting application fallout for the same reasons.

Brian Vieaux, president and chief operating officer of FinLocker, said that he speaks with LOs daily about “pipeline fallout” and how it can be mitigated.

“Most have told me that they see a higher rate of cancellations today than they have in years past,” Vieaux told HousingWire. “Most cite the buyer getting ‘cold feet’ as a reason. When I probe, I’m hearing that uncertainty with the economy, inflation, etc., are typically the specific reasons.”

Vieaux offered anecdotal evidence. “One LO, just this morning, texted me that he has buyers that he preapproves who are hesitant from the very beginning but want to “window watch.” Then, when they do put an offer in, the slightest issue — typically inspection-related — that arises causes them to withdraw.

“I’m not so sure that it’s sticker shock on the price of a home as much as anxiousness with the broader economy and potential impact on them after they buy,” he mused.

GO Mortgage LO Adam Neft said that while he hasn’t seen many of his clients withdrawing, he believes that the speed to close has put pressure on would-be buyers.

“One of the unfortunate dynamics has been the speed to offer and get into a contract,” Neft said. “I bought my home in November 2011 and got into contract end of August that year. I’d been looking for a few months. I found this property, went and looked, and decided I wanted to look at it a second time a few days later. Made an offer, negotiated, got into contract and closed. But from first look to accepted offer was probably seven to 10 days.

“Now? Homes are up for sale and often have several offers at or over list price within hours,” he added, explaining that the “highest and best” offers must be submitted as quickly as possible. “Buyers don’t have time to think or consider. It’s the ready, shoot, aim. Then they get an accepted offer and go, ‘What did we just do?’ Real estate is a massive transaction. I think people should have time to mull it over, but unfortunately, that’s become a luxury.”

Jennifer McGuinness, CEO of Pivot Financial, said that the reasons for application withdrawal may be as simple as a better option emerging. They could also be tied to the area where the buyer is looking, a lack of loan officer education or a busier application season.

“There can be a whole host of reasons why a purchaser will withdraw a purchase contract,” McGuinness said. “One, it could be inspection issues, where a property has something that they believe is material that they believe can become too expensive, or it’s not worth their while to fix.

“It also depends on when, she added. “If you have more contracts because you’re in a selling season or a buying season, you’ve got to have more canceled applications because there are more of them.”

Confidence issues, McGuinness says, have always existed among prospective homebuyers.

“You have to remember that each generation has different needs from the manner in which they interact with a Realtor, a loan officer or computers,” she said. “For example, your baby boomer is not going to be the one who wants to talk to an AI chatbot. That’s why you need to meet them where they’re at.”