A new survey by Free and Clear, an online site that provides free information and resources to homebuyers, shows that the majority of homebuyers lack basic knowledge of mortgages.
When asked in the survey whether they received information about mortgages in high school, the majority of borrowers surveyed – 86% – indicated that they had not, while only 17% said they’d learned about mortgages in college.
When asked to reveal where they ha d learned what they did know about mortgages, 24% said they learned from the Internet while another 24% indicated they’d been educated by lenders. A smaller percentage – 15% – said they’d learned about the mortgage process from a real estate agent, followed by school, 5%; the Consumer Financial Protection Bureau, 2%; and from other sources not mentioned, 30%.
Regardless of where they got their information, the survey results indicated that a lot of mortgage borrowers do not understand mortgages all that well. For example, while most respondents were correct in answering that the payment for an adjustable-rate mortgage can change over time, 18% of respondents also believed that the payment on a fixed rate mortgage could change.
Also, 28% of homebuyers did not know which loan term they’d pay the least interest on over the life of the loan. While 72% answered correctly that they’d pay the least interest on a 10-year loan, another 10% selected the 15-year loan; 9% the 30-year loan; 2% the 20-year loan; and 7% indicated that they just didn’t know.
The survey showed that the largest percentage of respondents did not compare mortgage lenders at all, with 36% saying they only contacted one lender. Another 28% compared two lenders; 22%, three lenders; 4%, four lenders; and only 10% compared more than four lenders.
Answers to another survey question revealed that 30% of respondents relied on an existing bank relationship to find their lender, while 29% were from referrals by real estate agents, and 18% from friends or colleagues. Surprisingly only 9% reported finding their lender through an Internet search.
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