| Nearly Half of Home Buyers Surveyed Don't Understand Essential Information about Mortgages |
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04/05/2011 04:47 (392 Day 16:29 minutes ago) | |||||
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The FINANCIAL -- SEATTLE -- As the housing market continues to
struggle with high inventory and a lack of demand, home buyers appear
ill-prepared to take out a mortgage, answering basic questions about
mortgage information wrong nearly half (46 percent) of the time (i)
according to a Zillow Mortgage Marketplace survey(ii).
For example, more than half (57 percent) of prospective home buyers who were polled do not understand how adjustable rate mortgages (ARMs) work. When asked if interest rates on 5/1 ARMs always reset higher after five years, the majority of home buyers answered yes. In fact, the interest rate will adjust to the prevailing rate after five years, even if rates have declined(iii). Currently, many borrowers whose ARMs have recently reset have lower interest rates than they did when they took out the loan. Additionally, one-third (34 percent) of the respondents who are prospective home buyers do not understand that lender fees are negotiable and that they vary by lender. They believe lenders are required by law to charge the same fees for credit reports and appraisals, when in fact home buyers can save money by shopping for the lowest fees. "Most people wouldn't jump out of a plane if they didn't know how to use a parachute, yet each year many buyers commit to the largest loan they will take out in their lifetimes without understanding essential information about mortgages," said Zillow Mortgage Marketplace Director, Erin Lantz. "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."
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