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Experian Consumer Homebuying Survey 2016

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Consumers need more education on how to better manage their credit as they prepare to buy a home, according to findings from a national survey by Experian. The survey, among individuals who are recent home buyers or are planning to purchase a home, showed that consumers understand having a good credit profile is key to making their homebuying dream come true but it is one of the reasons they say they are denied a loan.

Published in: Economy & Finance
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Experian Consumer Homebuying Survey 2016

  1. 1. 1 EDELMAN Experian Home Buying Survey Report March 2016
  2. 2. 2 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. WHO HOW MANY ACCURACY WHEN HOW Home Buyers (Purchased within the past year or plan to purchase in the next year) n=500 (250 Recent, 250 Future Home Buyers) Margin of Error = ± 4.4% (± 6.2% for each audience) Data Collection Occurred February 19-24, 2016 Online Survey RESEARCH OBJECTIVE: To garner media-genic research around home buyers’ attitudes toward credit scores, financial responsibility and the purchase process Research Methodology
  3. 3. 3 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Key Findings Home buyers appreciate the importance of credit, and they consider it a “valuable tool” rather than a “necessary evil” for major purchases. One in five homebuyers is likely to “opt out” of home ownership in the next 5-10 years, driven by a desire for more flexibility or to carry less debt. First-time future home buyers are especially worried about their credit, but many do not know what steps they can take to qualify for a better home loan. Recent home buyers are more aware of the value of credit – and monitor their credit more often – after going through the home buying process.
  4. 4. OVERALL RESULTS
  5. 5. 5 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q7: To what extent do you agree or disagree with the following statements? (Shown: Top 2 Box, Agree) Q7a: Which of the following statements comes closest to your opinion... Credit is a VALUABLE TOOL or a NECESSARY EVIL for making major purchases Q8: In your opinion, how important is one’s credit score in purchasing a home? (Shown: Top 2 Box, Important) Buyers recognize that credit plays a critical role in purchasing a home and qualifying for home loans 93% Say that one’s credit score is important in purchasing a home 74% See credit as a “valuable tool,” not a “necessary evil” for making major purchases 48% Are working to improve their credit to qualify for a better home loan rate See Credit as a VALUABLE TOOL Working to IMPROVE CREDIT 54% of FUTURE BUYERS Credit Impact on HOME BUYING 90% Men vs. 95% Women
  6. 6. 6 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q13b: Have you ever been denied for a home loan for any of the following reasons? Q13c: Has your credit score ever negatively impacted your ability to get a home loan? 16% 12% 10% 10% 7% 5% 5% 4% 4% 3% Poor credit history Outstanding debt Limited credit history Insufficient income Insufficient assets Employment issues Unable to verify income A spouse’s poor credit history A spouse’s limited credit… Unable to verify assets Reasons for Being Denied a Home Loan Poor credit history is the top reason why home buyers report getting denied for a home loan 19% SAY THAT THEIR OWN CREDIT SCORE has negatively impacted their ability to get a home loan 8% SAY THAT A SPOUSE’S CREDIT SCORE has negatively impacted their ability to get a home loan 15% Ages 18-34 8% Ages 18-34 9% Men
  7. 7. 7 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. 39% 40% 61% 41% 26% 73% 24% 17% 72% I have delayed purchasing a home so that I could qualify for a loan that better meets my needs I would purchase a more expensive home if I had better credit and could qualify for a larger loan I felt / feel prepared financially to purchase a home Home Buyer Perceptions by Age Ages 18-34 Ages 35-54 Ages 55+ Younger home buyers’ purchasing is more limited by the types of loans that they are able to qualify for Q7: To what extent do you agree or disagree with the following statements? (Shown: Top 2 Box, Agree)
  8. 8. 8 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. 34% 32% 72% 43% 47% 50% I was / am worried my credit status might hurt my ability to purchase a home I am concerned that my credit score doesn’t qualify for the best home loan rate I felt / feel prepared financially to purchase a home Impact of Knowing Credit Score on Home Buyer Perceptions Know Credit Score Do Not Know Credit Score Knowing one’s credit score remains important to building confidence during the home buying process Q7: To what extent do you agree or disagree with the following statements? (Shown: Top 2 Box, Agree; Shown among those who know their credit score, n=388 and those who do not n=70)
  9. 9. 9 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q4: Within the past year, have you passed any of the following life milestones? (Shown: Among Total, n=500) Q5: And in the next 12 months, do you plan to pass any of the following life milestones? (Shown: Among Total, n=500)) Buyers also recognize the impact of credit when refinancing a home 65% Agree their credit score affects the interest rate to refinance a home 16% Have refinanced in the past year or plan to in the year ahead Credit Impact on REFINANCING Recent / Planned REFINANCING 21% of RECENT BUYERS 60% 1st Time Buyer vs. 71% Experienced Buyer
  10. 10. 10 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q14c. How likely are you to opt-out of home ownership in the next 5-10 years? Q14d: Which, if any, of the following reasons describe why you might opt-out of home ownership in the next 5-10 years? (Shown: Among those likely to opt out, n=97) Some are already considering opting out of home ownership for more flexibility and to carry less debt 49% 36% 35% 26% Want more flexibility to relocate Do not want to carry as much debt Want to invest in something else Do not want the responsibility of maintaining a home Reasons to Opt-Out of Homeownership (Shown: Among those likely to opt-out in 5-10 years)19% of ALL HOME BUYERS are likely to choose not to own a home in the next 5-10 years Opting Out of HOME OWNERSHIP 24% Ages 18-34
  11. 11. FUTURE HOME BUYERS’ EXPERIENCE
  12. 12. 12 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q7: To what extent do you agree or disagree with the following statements? (Shown: Top 2 Box, Agree; Among future buyers, n=250) Future first-time buyers are especially concerned about their credit and its impact on their purchase ability 59% of FUTURE BUYERS feel financially prepared to buy a home 34% of FUTURE BUYERS say their credit might hurt their ability to purchase a home 59% of FUTURE BUYERS are confident about their credit status Future Buyer CREDIT CONFIDENCE Future Buyer PREPAREDNESS Future Buyer CREDIT CONCERNS 51% 1st Time Buyer vs. 68% Experienced Buyer 50% 1st Time Buyer vs. 69% Experienced Buyer 41% 1st Time Buyer vs. 26% Experienced Buyer
  13. 13. 13 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q7: To what extent do you agree or disagree with the following statements? (Shown: Top 2 Box, Agree; Among future buyers, n=250) Q8: Which of the following activities are you MOST focused on to improve your credit? (Shown: Among those working to improve their credit, n=238) 68% 60% 28% 15% 11% Paying bills on time Paying off debt Keeping balances low on credit cards Protecting credit info from fraud and identity theft Not applying for / opening new credit accounts Future Buyer Credit Building Activities (Shown: Top 2 Choices Among those working to improve their Credit) 54% of FUTURE BUYERS are working to improve their credit to qualify for a better home loan rate, but 35% of FUTURE BUYERS say they do not know what steps to take to qualify for a larger loan Some future buyers are working to build their credit, but many first-time buyers do not know how to start 43% 1st Time Buyer vs. 26% Experienced Buyer
  14. 14. 14 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q6: Have you already been pre-approved for a loan for your next home purchase? (Shown: Among future buyers, n=250) Q7: To what extent do you agree or disagree with the following statements? (Shown: Top 2 Box, Agree; Among future buyers, n=250) Many future buyers have delayed a purchase to improve their credit, and most are not pre- approved Future Buyer LOAN PRE-APPROVAL Future Buyer PURCHASE DELAY Future Buyer LOAN RATE CONCERNS 38% of FUTURE BUYERS are concerned their credit score doesn’t qualify for the best home loan rate 45% of FUTURE BUYERS delayed a purchase to improve their credit to get better interest rates 76% Not Pre- approved 55% 1st Time Buyer vs. 31% Experienced Buyer 49% 1st Time Buyer vs. 27% Experienced Buyer
  15. 15. RECENT HOME BUYERS’ EXPERIENCE
  16. 16. 16 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. 54% My credit score was HIGHER than I expected 58% I felt MORE CONFIDENT in my understanding of the kind of loan I was eligible for 18% My credit score was LOWER than I expected 25% I was SURPRISED by my credit score Q10: Did you, yourself, check your credit report or credit score at any point in the home buying process? (Asked of recent buyers, n=250) Q12: Which of the following, if any, applied to you? (Shown: Among recent buyers who checked their credit score in the process of purchasing a home, n=197) Q13A: After learning your credit score, were you more or less confident in your understanding of what kind of home loan you would be eligible for? (Shown: Among recent buyers who checked their credit score in the process of purchasing a home, n=197) Recent home buyers that checked their credit score felt more confident after doing so Recent Buyer CREDIT CHECKING Credit Reactions (Shown: Among those that checked their credit) 51% 28%21% When first considered purchasing Later Never NET 79% of RECENT BUYERS checked their credit 37% Ages 55+
  17. 17. 17 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Q13d: After purchasing a home, do you consider access to credit to be more valuable or less valuable than you did before you had purchased a home? (Asked of recent home buyers, n=250) Q13e: And how, if at all, has purchasing a home affected how you use credit? (Asked of recent home buyers n=250) After purchasing, homeowners become more cognizant of their credit 38% 29% 24% 16% 16% I monitor my credit more often I am wary of taking on more debt I use credit cards less often I use fewer credit cards / cancelled a credit card I enrolled in a credit monitoring service NET 72% HOME BUYING HAS HAD AN IMPACT ON CREDIT USAGE BEHAVIORS _____________ NET 81% AGES 18-34 Recent Buyer IMPACT ON CREDIT PERCEPTIONS Recent Buyer IMPACT ON CREDIT BEHAVIORS 60% 36% 4% More valuable No impact Less valuable
  18. 18. 18 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. 76% 82% 72% 68% 73% 62% 56% 54% Difficulty securing a loan Difficulty getting a good interest rate Difficulty getting a loan large enough to suit one's needs Requiring a co-signer Recent Home Buyer Impact Perceptions Poor Credit Identity Fraud Q9: In which of the following ways do you think having a poor credit status could affect a potential home buyer? (Shown: Among recent buyers, n=250) Q13: In which of the following ways do you think a victim of identify fraud could be affected when buying a home? (Shown: Among recent buyers, n=250) Recent buyers recognize the impact of poor credit, but fewer understand the effects of identity fraud -20 -16 -14 Difficulty securing a loan Difficulty getting a good interest rate Difficulty getting a loan large enough to suit one's needs Requiring a co-signer
  19. 19. APPENDIX
  20. 20. 20 Intelligent Engagement© Copyright 2016 Daniel J Edelman Inc. Category Subcategory % Home Purchase Future Buyer 50% Recent Buyer 50% Gender Male 43% Female 57% Age 18-34 41% 35-54 34% 55+ 25% Region Northeast 27% South 27% West 20% Midwest 26% Race / Ethnicity White 81% African American 6% Hispanic 6% Asian American 4% Other 3% Category Subcategory % Know Credit Score Yes 78% No 14% Unsure 8% Credit Score Exceptional 21% Very Good 31% Good 18% Average 17% Poor 12% Education HS or less 14% Some college 31% College graduate 37% Graduate school 17% Household Income <$25K 10% $25K-<$50K 26% $50K-<$75K 29% $75K-<$100K 15% $100K+ 17% Demographics Respondent Demographics Totals may not add up to 100 due to rounding
  21. 21. Thank you

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