The housing market is getting hotter, but would you be surprised if you were told that almost one third of potential homeowners didn’t know how to answer basic questions regarding how to choose a lender, financing, and terms. The study, performed by Zillow.com, asked over 1,000 current and prospective homeowners these questions. Some of the strangest findings were that 31% of buyers don’t think that it’s possible to get a mortgage for less that 5% down, and (shockingly) 34% of those questioned didn’t know what APR (annual percentage rate) stood for. Also, almost 1 in 4 thought that you must close with the lender that pre-approved your mortgage.
“All too often buyers focus on negotiating a lower home price and ignore the importance of finding the right loan,” said Erin Lantz, director of mortgages for Zillow. “Buyers should always shop multiple lenders and compare rates and fees and read lender reviews in order to find the best loan for their situation.”
Another expensive mistake that home-seekers make is going shopping for houses when they already have financing in place. They do this because it enables them to act quickly if they see a home that they want. But 26% of these people think that once they are pre-approved they have to finalize the deal with those loans; in reality there is no obligation- if buyers see better terms elsewhere they should definitely take them.
Interestingly enough, existing homeowners aren’t excluded from these faulty lines of thinking. Of those questioned around 20 percent didn’t know that underwater mortgages (mortgages where borrowers owe the bank more than their home is worth) can be refinanced at a lower rate than they currently have.
If you’re considering buying a home, or know someone who is, I would highly recommend that you take a look at this article and make sure that you brush up on your homeowner 101 material before moving forward. Best of luck!