Before prospective homeowners begin their plans for moving into a new home, they have to be able to comprehend how the mortgage and lending system works. But a new reports is indicating that a surprisingly high number of people don't understand it and may be making poor financial decisions as a result.
According to a Zillow
Mortgage Marketplace Survey, many homebuyers are misinformed about the basics of taking out a mortgage, answering questions wrong nearly half of the time.
For instance, 55 percent did not know that mortgage rates are constantly adjusting, nearly 40 percent believed "pre-qualifying" meant they secured a loan and more than one in three didn't understand that lender fees vary by the lender.
"Most people wouldn't jump out of a plane if they didn't know how to use a parachute," said Erin Lantz, Zillow mortgage marketplace director. "Yet each year many buyers commit to the largest loan they will take out in their lifetimes without understanding essential information about mortgages."
Some housing analysts say tighter lending practices is hampering the real estate market, but this study may suggest the rules may be needed to keep fewer people from taking out mortgages that they may not understand how to manage.