Opportunities Exist to Offer Digital Verification Tools to More Homebuyers

Over the last few years, several mortgage origination technology solutions have been rolled out to increase efficiency, improve the borrower experience, and lower costs. One of these advancements, digital verification, gives borrowers the option to allow lenders or third-party service providers to digitally access their financial information, such as bank accounts and payroll data, to verify employment, income, and assets. With this method, potential homebuyers do not need to manually pull and submit those records to their lender.

Earlier this year, we surveyed recent homebuyers – those who purchased a home with a mortgage acquired by Fannie Mae between January 2023 and November 2023 – to better understand adoption rates and overall experiences with digital technology. Because we conducted a survey on this same topic three years ago, we were also able to look for trends in consumers' use of the technology, including how their preferences have changed. We believe these insights can help the industry further evolve the mortgage origination process to the benefit of all stakeholders, including lenders, service providers, and, of course, consumers.

Summary of key findings:

• Consistent with the exponential growth of technology use in our day-to-day lives, the use of personal-touch-only channels (i.e., in-person or by-phone) when obtaining a mortgage has significantly declined. Most recent homebuyers opted for a hybrid approach, leveraging both online channels and personal-touch channels.
• Overall, recent homebuyers expressed immense interest in having a more or fully digital mortgage process.
• Many recent homebuyers reported they were not offered the digital verification option to grant lenders' access to their online bank accounts for lenders to verify funds for closing or down payment. Among those who were offered, most agreed to grant permission. For the very few who were offered but declined, data security was cited as their primary concern.
• Slightly more than half of recent homebuyers who granted lenders or technology service providers (TSPs) access to their online bank accounts said they would use the digital verification technology again for their next mortgage. Of those who were not offered the digital verification method, only 15% said they would use the technology on their next mortgage, indicating that prior experience matters for technology adoption.

Most recent homebuyers opted for a hybrid approach (using both online channels and personal-touch channels) when obtaining their current mortgage. The usage of personal-touch-only channels (i.e., in-person or by-phone) has declined significantly.

In fact, borrowers' usage of the hybrid approach has increased gradually since 2020. In contrast, over the same period, the use of personal-touch-only channels declined significantly. While it remains small, the use of online-only channels increased from 2020 and remains steady compared to 2021.¹

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For most tasks related to finding their next home to buy or rent, most recent homebuyers said they prefer to use online channels. This was particularly true when it comes to searching for the property, selecting a lender (if buying), and completing a mortgage or rental application. However, 90% said they would prefer to tour a potential home in-person.²

Homebuyers' interest in a more or fully digital mortgage process (where homebuyers could complete more or all steps online) is very high.

Additionally, the interest level grew significantly from 2021 to 2024, and it remains high across all demographic groups.³

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Homebuyers appreciate the benefits of a digital mortgage process.

Most recent homebuyers cited process acceleration (75%) and making the process easier (71%) as the top benefits of a digital mortgage process.

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Many recent homebuyers reported that they were not offered the digital verification option to grant lenders or TSPs access to their online bank accounts.

Approximately one-third of recent homebuyers reported they were asked by their lender to access their bank accounts online to verify funds for closing or down payment. When asked, most agreed to grant permission. Of the 4% who were offered but declined to grant such access, most cited data security as the major concern.

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Slightly more than half of recent homebuyers who granted access to their online bank accounts on their current mortgage said they would use the digital verification technology again for their next mortgage. Of those who were not offered the digital verification method, only 15% said they would use the technology on their next mortgage.

Additionally, the survey data show that data security was less of a concern among those who would use digital verification technology for their next mortgage. Both findings indicate that experience matters, in part because positive prior interactions with the technology may allay privacy or security concerns. Finally, those who prefer the digital verification method seem to be more technology savvy generally, as they also showed stronger interest in using online channels to complete other important homebuying/renting tasks.

We believe digital verification technology should be offered more broadly to borrowers to encourage adoption.

This study shows that homebuyers are extremely interested in further digitizing the mortgage process, with most citing time and simplicity benefits. When offered the opportunity to grant lenders or TSPs access to their online bank accounts, most homebuyers agreed. We think this is an important finding and suggests that broad and proactive efforts by lenders to offer these tools would be well-received by consumers – and could help normalize further digitization efforts in the future.

While privacy and data security concerns remain paramount, we believe effective communication between loan officers and homebuyers is the key to driving greater adoption of this technology. It's critical that potential borrowers clearly understand what digital verification is, how it works, its benefits, and how its risks are managed and mitigated. Equipped with the knowledge that digital verification technology is there to make an often-complicated mortgage process simpler and safer, we think even more consumers would use it to their advantage.

To learn more, read the full research deck.

Opinions, analyses, estimates, forecasts, beliefs, and other views of Fannie Mae's Economic & Strategic Research (ESR) Group or survey respondents included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, beliefs, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, beliefs, and other views published by the ESR Group represent the views of that group or survey respondents as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

¹ Young homebuyers (age <64) are significantly more likely than older homebuyers (age 65+) to have used the online-only approach (14% of those 18-34, 11% of those 35-44, and 13% of those 45-64 vs. 3% of those 65+). Over one-quarter of Asian recent homebuyers (29%) used online-only channels during the process of getting their current mortgage, significantly more than other race/ethnicity groups (10% for White homebuyers, 12% for Black homebuyers and 13% for Hispanic/Latino homebuyers).

² Older recent homebuyers (age 65+) are significantly less likely than younger recent homebuyers (age 18-44) to prefer using the online method to look for a home, select a lender, or complete a mortgage/rental application.

³  In general, interest level in a more or fully digital mortgage process remains high across all the demographic groups surveyed. Notably, younger recent homebuyers (aged 18-44) are significantly more likely than older homebuyers (aged 65+) to show interest in a more or fully digital mortgage process. Also, higher-income recent homebuyers (AMI greater than 100%) are significantly more likely than lower-income recent homebuyers (AMI less than 80%) to show interest in a more or fully digital mortgage process.