Survey Says Homebuyers Not Educated on Mortgage Process
If someone asked you what type of home you would like to buy, you’d probably already know the answer. “A two-story brick home with an eat-in kitchen and swim/tennis community close to good schools,” you might say.
You may have even conducted a lot of research on your own, finding out which schools you are most interested in, what areas are best for commuting to your job and where you can get the best home that you can afford.
But what if someone asked you what type of mortgage you want, could you answer the question just as quickly?
A recent Zillow survey found that while the number of homebuyers is increasing, many are ill prepared for the mortgage process they will be going through before they can get the keys to their new home.
For first-time homebuyers, the process of applying for a mortgage can seem daunting and those that haven’t been in the market for a while may need a refresher course. Based on the survey results of Zillow, here are some of the most common facets of the mortgage process that are misunderstood.
Best Terms and Rates
Many homebuyers do not understand the process to secure the best possible loan terms and interest rates. The survey found that 24 percent of homebuyers incorrectly believe that the best interest rates and fees can always be found through the bank with which they currently do business. Additionally, half of all respondents did not understand that mortgage rates change throughout the day.
As a non-bank lender, Southeast Mortgage allows homebuyers to get prequalified for loans in order to lock in the best rates and terms.
The survey found more than one-third of current homeowners incorrectly believe you can only refinance your home every 12 months. For any refinance, a homeowner should evaluate expenses and fees associated with refinancing and the amount of savings to be had on both the monthly payment and for the life of the loan. Based on that evaluation, a homeowner could decide to refinance after six months if there is a clear financial benefit to do so.
More than one in three of Zillow’s survey respondents did not know what “annual percentage rate” means. If you aren’t familiar with the finance industry, you may not know some of the terms used by mortgage professionals. A trustworthy and licensed MLO can brief you on terms but don’t hesitate to ask questions. For the definition of annual percentage rate and other industry terms, see our Mortgage Glossary and follow us on Facebook and Twitter for “Mortgage Word Wednesday.”
With record low rates and increasing home values now is an optimal time for homebuyers. Don’t let fuzzy knowledge about the mortgage process stand in the way, intimidate you or prevent you from obtaining the best advice, rate and terms possible for your loan.
A mortgage is a significant financial decision and you should be knowledgeable about the process. There are a number of resources and tools available to help. As a starting point, take Zillow’s Mortgage IQ Quiz to see how you fare against their survey respondents.
– Kathy Gyselinck, Executive Vice President for Southeast Mortgage