Forty-six percent of home buyers are not prepared with the essential information needed to take out a mortgage, a recent Zillow survey shows.
Online real estate hub Zillow conducted a Zillow Mortgage Marketplace survey and found that respondents answered basic questions about mortgage information wrong nearly half the time. Further, 44% said they are not confident in their knowledge of mortgages and the mortgage process.
When asked whether interest rates on 5/1 adjustable rate mortgages always reset higher after five years, the majority answered “yes.” In fact, the interest rate will always adjust to the prevailing rate after five year, even if rates have declined.
Another question tested knowledge of lender fees. Thirty-four percent of respondents falsely believe that 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 findings showed that a majority (55%) of respondents do not understand that mortgages rates change throughout the day. Additionally, 42% of the polled prospective home buyers do not understand that Federal Housing Administration loans are available to all buyers. Rather, they believe only first-time buyers qualify. Other questions addressed knowledge of prequalification and mortgage discount points.
View and take the Zillow Mortgage Marketplace Quiz.
Find out more about the survey findings.
Written by Elizabeth Ecker