h/t MicroCapExplosions, A new GSE research report shows the high closing costs for first-time and low-income homebuyers. The report states:
Within the low-income first-time homebuyer population, 21% of Black homebuyers and 19% of white Hispanic homebuyers paid closing costs equal to or greater than their down payment, compared with 6% and 14% of Asian and white non-Hispanic homebuyers, respectively.
Lender and loan origination costs plus title and settlement costs represent up to 75% of all closing costs — with low-income first-time homebuyers paying the highest costs relative to the purchase price of the home.
The fees are incredibly high for these homebuyers. When your closing costs are equal or greater the down payment, it is going to be a barrier to home buying.
Every industry has been adopting technology to lower their costs and add more value to consumers. Insurance, for example, is as old of an industry you can find and they have used technology to lower premiums while running a profitable business, look at Progressive Insurance. Real estate has been hesitant for the most part to adopt technology to lower their costs. Although this has been changing recently. The digitization of data and processes is starting to allow the real estate industry to start providing faster and cheaper solutions.
The GSE research report also points to using more technology as a way to lower these closing costs to make homeownership more affordable:
Permit greater flexibility in how certain credit-risk management, title insurance, and settlement services are performed. For instance, Fannie Mae has allowed for automated valuation models to be used in lieu of a formal appraisal for many of its refinance loans for low-income borrowers — an example of how technology and improved use of data can reduce or eliminate the need for a traditional appraisal. Alternative paths to achieving the proper levels of risk management should be explored, particularly those that reduce costs to consumers.
Voxtur has been providing many of these solutions for faster servicing and lowering costs. Their aNow service has been doing just that for the valuation service. Voxtur also has a title insurance alternative that uses its vast database to provide an alternative and cheaper title insurance.
This GSE research report clearly shows where the industry is going and how Voxtur is positioned to ride the digitization wave in real estate.