Are you mortgage literate?
Some of us are not very good at mortgage trivia.
That's the upshot of a survey of 1,005 U.S. residents conducted for Zillow Mortgage Marketplace.
We don’t know how an adjustable-rate mortgage works, are unaware that lender fees are negotiable and don't know what home loan prequalification is.
Could this be the reason we still hear so much about foreclosures, bank failures, and fraud?
The poll taken in April underscores the unease many of us feel when looking for a new home loan. In fact, 44% of those surveyed said they weren't confident in their knowledge of the process.
The survey also found:
- 57% didn't understand that a 5/1 ARM doesn't automatically reset at a higher interest rate after five years; it adjusts to the prevailing rate.
- 34% didn't understand there is no law requiring lenders to charge the same fees and that shopping for the lowest lender fees can save you money.
- 37% believed prequalified means they have secured financing. (In fact, sellers consider this a meaningless step; you should seek preapproval as your first step.)
These results underscore the importance of a basic financial education for any person considering the purchase of a home. Even existing home owners contemplating their next home should consider at least a refresher course.
You can start with our home loan basics:
You also might consider in-person classes offering basic home ownership insight. Many community action organizations even give you a certificate and may qualify you for down-payment assistance programs for taking active participation in classes and workshops.
Home buyers need to understand now more than ever that the lending industry has changed dramatically. If you are not on board with these changes, you’ll wind up shortchanging yourself -- or worse -- you’ll never find yourself eligible to own your own home.
A home loan is likely the biggest financial investment you’ll make in a lifetime. Doesn’t it make sense to know all you can about where your money is going?
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