Most homebuyers go over budget — a concern for lenders 

A recent report found that the vast majority (77%) of buyers who bought a home in the past two years went over their original budget — with 10% exceeding their budget by more than $80,000.

And that has some loan officers worried, according to a recent ServiceLink survey of more than 1,500 consumers and 507 mortgage professionals across the U.S.

Stretched too thin

A top concern reported by many of the loan officers surveyed was affordability and the challenge of qualifying borrowers for a mortgage they can keep up with. 

That concern appears to be well-founded: According to the report, 50% of Gen Z respondents and 44% of millennial respondents have been at risk of missing at least one mortgage payment over the past two years. 

A disconnect with buyers 

Loan officers identified several other headwinds faced by today's borrowers — but in many cases, buyers were less likely to report the issue as a significant challenge. 

Mortgage pros and buyers were closely aligned on high home prices as a challenge, but while nearly two-thirds (64%) of loan officers identified mortgage rates as a top issue, just under half (49%) of buyers agreed. 

Similarly, 42% of LOs cited lack of money for a down payment as a challenge for borrowers — compared to just 22% of recent buyers — and 35% of lenders highlighted poor credit as a hurdle versus 14% of borrowers.

Making sense of fees

While a majority of buyers said they fully understood many of the fees involved in the homebuying process, loan officers were skeptical. "From their perspective, homebuyers don't know as much as they think they do about each fee," the report stated.  

Some of the biggest gaps included the understanding of real estate taxes (67% of buyers reported fully understanding taxes vs. 48% of LOs who believe buyers fully understand them); real estate agent fees (60% of buyers vs. 37% of LOs); and appraisal fees (58% of buyers vs. 33% of LOs).

That's important for real estate agents to understand, as buyers are more likely to reach out to their agent (43%) than a loan officer (29%) for information about the mortgage process. 

Buyers are 'overwhelmed'

The report characterized modern buyers as "stressed," with going over budget cited as a top stressor, along with making an offer and negotiating the price.

"Between the paperwork, negotiations, securing a good rate and figuring out what the price of homeownership will actually cost them, today's homebuyers are telling us that they are overwhelmed," Dave Steinmetz, president of origination services at ServiceLink, said in the report.

"Many are being forced to compromise, stretching beyond their budgets yet still not getting everything they want in a home."

Expectations and compromises

Even though most of the respondents went over budget, many still had to make compromises to afford a home. The report found that 21% of recent buyers bought a home with a smaller yard than they hoped for while another 21% settled for fewer bedrooms than desired.

Loan officers noted that many buyers start the process with unrealistic expectations, with the top three including finding the perfect house below market value (63%), underestimating the cost of homeownership (61%) and expecting a seller to accept a lowball offer (54%).