Study Reveals Consumers Know Little About Mortgages

May 3, 2011 No Comments »

home loans

A new Zillow Mortgage Marketplace survey revealed consumers know very little about how mortgages work.

More than half (57%) of prospective home buyers polled thought adjustable-rate mortgages always reset higher, despite the fact that they adjust to the sum of the margin plus index.

At the moment, many ARMs have adjusted lower, thanks to record lows for many mortgage indexes, such as the LIBOR.

These same homeowners could be scampering to refinance their loans, even if they might be enjoying a lower monthly mortgage payment, in least in the interim.

Even worse, 34 percent of respondents don’t realize mortgage lender fees are negotiable and vary by institution.

Consumers seem to believe that lenders are required by law to charge the same fees for things like credit reports and appraisals.

Charges like loan origination fees aren’t even compulsory, and you could even get your hands on a no cost mortgage if you shop enough.

Additionally, 55 percent of those surveyed don’t understand that mortgage rates change throughout the day, just as stock prices rise and fall.

And 45 percent of prospective home buyers believe they should always buy mortgage discount points when obtaining a mortgage.

Unfortunately, it doesn’t always pay to do so, as it’s dependent on how long you plan to stay in the home (or with the mortgage).

Most people don’t keep their mortgages for the full term, let alone a decade.

More than a third (37%) believe pre-qualifying for a mortgage means they’ve secured financing, though this is far from the truth (pre-qualification vs pre-approval).

Finally, 42 percent didn’t realize FHA loans are available to all buyers, not just first-time homebuyers.

Consumer education is paramount to solving the ongoing housing crisis, and the very reason this site was created.

So if you’re shopping for a mortgage, do plenty of research (months of it) before making one of the biggest financial decisions of your life!

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