Homebuyers are not educated about basic mortgage information, according to a recent survey from online real estate marketplace Zillow.
Those looking to purchase a home are not prepared to take out a mortgage, answering basic questions about mortgage information wrong nearly half (46 percent) of the time, according to the survey. Forty-four percent said they are not confident in their knowledge of mortgages or the mortgage process.
More than half (57 percent) of prospective homebuyers do not understand how adjustable rate mortgages (ARMs) work. One-third (34 percent) of the respondents who are prospective homebuyers also do not understand that lender fees are negotiable and that they vary by lender. They believe lenders are required by law to charge the same fees for credit reports and appraisals.
"Most people wouldn’t jump out of a plane if they didn’t know how to use a parachute, yet each year many buyers commit to the largest loan they will take out in their lifetimes without understanding essential information about mortgages," said Zillow Mortgage Marketplace Director Erin Lantz. "By simply spending a few hours researching how a mortgage works, and by shopping around for the most competitive rates and fees, buyers can save a lot of money."
Other survey findings include:
- Nearly half (45 percent) of polled prospective homebuyers believe they should always buy mortgage discount points when obtaining a mortgage.
- More than half (55 percent) of prospective homebuyers do not understand that mortgage rates vary throughout the day.
- More than one-third (37 percent) of prospective homebuyers believe that pre-qualifying for a loan means they have secured financing.
- More than two in five (42 percent) of prospective homebuyers do not understand that Federal Housing Administration (FHA) loans are available to all buyers. Instead, they believe only first-time buyers qualify.
