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
More than 1,000 home buyers were asked to respond true or false to eight mortgage-related 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.
Forty-five percent of home buyers surveyed also incorrectly stated that home buyers should 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.
An additional one-third of respondents do not understand that lender fees are negotiable and vary by lender, incorrectly thinking lenders are required by law to charge the same fees for credit reports and appraisals.
Survey respondents also believe that pre-qualifying for a loan means they have secured 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.
Slightly less than half of the polled prospective home buyers also do not understand that Federal 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.
Pop quiz. True or false, the rates of 5/1 adjustable-rate mortgages always increase after five years.
If you answered true, then you've joined 57 percent of people who also gave the wrong answer in a recent survey from real estate site Zillow on mortgage basics. (The right answer is false because while such loans do adjust after five years, the rates could go either up or down.)
This wasn't the only trouble area. The 1,000-plus poll-takers also had trouble with interest rates, FHA loans and lender fees. Overall, 44 percent said themselves that they were lacking in knowledge of the basics.
The consequence of misinformation could mean lost dollars for potential homebuyers, said Erin Lantz, director of Zillow's Mortgage Marketplace.
What she said:
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.
Other findings from the online survey, taken April 13-15:
--Forty-five percent of those surveyed think they should always buy mortgage discount points, which are prepaid interest. The fact is, the decision hinges on how long you plan to own the property. It would not be worthwhile to buy them in certain cases.
--Fifty-five percent of those polled don't grasp the concept that rates of home loans can change drastically throughout the day.
3 things you need to get financing
A good credit score. Check your score at the three major credit bureaus: Equifax, Experian and TransUnion. Lenders say 600 is the minimum while you’re in a good spot with a score of 740.
A steady job, the biggest clue you’ll be able to make your monthly payments. Consult a lender to figure out how much money you have to work with and which loan product would work best.
Enough for a down payment, which varies by loan size and type. Typically, a down payment is 10 or 20 percent. However, people are still able to lock in 90-95 percent loans, depending on the market and consumer’s circumstances, said Steve Hops, residential president of the California Mortgage Bankers Association and senior vice president of Guild Mortgage in San Diego.
Call Tami Winbury Today!
Keller Williams Realty
805-798-3412
http://www.venturacountyhomesforsale.net/
http://www.liveojai.com/
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