Home buyers lack mortgage know-how

 

A new survey indicates that home buyers are ill-prepared to take out a mortgage, answering basic

questions about mortgage information incorrectly nearly half (46 percent) of the time, according to a

Zillow Mortgage Marketplace.

MAKING SENSE OF THE STORY

statements, including “The rates of 5/1 adjustable-rates mortgages always increase after years.”

Although the correct answer is false, because 5/1 ARMs do adjust after five years, but the rates

could go up or down, 57 percent of people surveyed answered this question incorrectly.

More than 1,000 home buyers were asked to respond true or false to eight mortgage-related

always buy mortgage discount points. The fact is, the decision hinges on how long the borrower

plans to own the property, and in some situations, buying mortgage discount points is not

worthwhile.

Forty-five percent of home buyers surveyed also incorrectly stated that home buyers should

by lender, incorrectly thinking lenders are required by law to charge the same fees for credit

reports and appraisals.

An additional one-third of respondents do not understand that lender fees are negotiable and vary

financing. With a pre-qualification, which is the earliest step in the mortgage process when a

lender approximates the amount the borrower can afford, the lender does not run the borrower’s

credit or request any documentation to verify the information provided by the borrower.

Survey respondents also believe that pre-qualifying for a loan means they have secured

Housing Administration (FHA) loans are available to all buyers, but instead believe only first-time

buyers qualify. In reality, FHA loans can cost less for many buyers, including repeat buyers with

low to average credit scores and with down payments of less than 20 percent.

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Slightly less than half of the polled prospective home buyers also do not understand that Federal

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