Homebuyers still in the dark about mortgages

May 09, 2013 02:00PM

Homebuyers are still largely ignorant about mortgages, according to a new survey by real estate website Zillow cited by CNNMoney.

In a survey of over 1,000 current and prospective homeowners, respondents answered basic questions about terms, lender selection and financing wrong nearly one-third of the time. Roughly 31 percent of buyers don’t think it’s possible to get a mortgage for less than a 5 percent down payment; 34 percent don’t understand what an “annual percentage rate” is, and a quarter believe that one can only arrange financing with a lender that pre-approves one’s mortgage. 

“All too often buyers focus on negotiating a lower home price and ignore the importance of finding the right loan,” Erin Lantz, director of mortgages for Zillow, told CNNMoney. “Buyers should always shop multiple lenders and compare rates and fees and read lender reviews in order to find the best loan for their situation.”

But shopping with different vendors isn’t possible unless homebuyers understand fundamentals such as an APR, which affects fees, loan originations and other costs. Such ignorance can have long-term consequences. [CNNMoney]  – Hiten Samtani