RISMEDIA, May 5, 2011—As the housing market continues to struggle, home buyers appear ill-prepared to take out a mortgage, answering basic questions about mortgage information wrong nearly half (46 percent) of the time, according to a Zillow® Mortgage Marketplace survey. In fact, 44 percent admitted they are not confident in their knowledge of mortgages or the mortgage process. Zillow® Mortgage Marketplace, with Ipsos, surveyed prospective home buyers, asking them to gauge their own knowledge of mortgages, and asking basic questions about mortgage facts.
More than half (57 percent) of prospective home buyers who were polled do not understand how adjustable rate mortgages (ARMs) work. When asked if interest rates on 5/1 ARMs always reset higher after five years, the majority of home buyers answered yes. In fact, the interest rate will adjust to the prevailing rate after five years, even if rates have declined. Currently, many borrowers whose ARMs have recently reset have lower interest rates than they did when they took out the loan.
Additionally, one-third (34 percent) of the respondents who are prospective home buyers 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, when in fact home buyers can save money by shopping for the lowest fees.
“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,” says 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.”
It’s a classic case of. “you don’t know what you don’t know”. Taking out a mortgage is not something most of us do very often and keeping up with the constant changes in the laws and regulations can be daunting. Our best advice, work with an experienced lender and ask a lot of questions. We work closely with some excellent lenders, contact us if you need a referral!
{ 1 comment… read it below or add one }
Being married to a loan officer I could not agree more. We have to do our best to educate the consumer home buyer of the best options for them and paint ourselves as an asset