HALF of America has no idea what a mortgage actually is, new research suggests.
That’s according to a recent poll that asked 2,000 Americans, 73 percent of them homeowners, to test their knowledge of the housing market and the lending industry.
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Only 49% chose the correct definition of “mortgage” from a list of options, although homeowners were more likely to get it right (54%) than renters (40%).
And nearly one in five (18%) admitted they weren’t sure what kind of minimum down payment is required to buy a home.
Despite this, 80% of respondents felt they passed the knowledge test, with 12% believing they got every question right.
Conducted by OnePoll on behalf of PrimeLending, the survey suggests that the average American homeowner remains cautious about borrowing money from financial institutions.
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Only 42% of homeowners surveyed used a mortgage to finance their home; 48% used cash and less than a tenth (7%) inherited their home from a family member.
Millennial homeowners aged 26-40 were far more likely to buy their homes outright or with cash (55%), while baby boomers aged 57-75 were more likely to take out a mortgage (37%).
42% of respondents would be more likely to qualify for a longer loan with a lower interest rate than a shorter loan with a higher interest rate, with small statistical differences between current homeowners (44%) and renters (42%).
“When it comes to getting the best mortgage, choosing an experienced, knowledgeable lender is critical,” said Tim Elkins, chief production officer of PrimeLending, a PlainsCapital company.
“For example, many homebuyers assume that the lowest interest rate means the lowest costs, which may not be the case. Your mortgage lender should be able to run through multiple scenarios and help you evaluate all of your options.”
Overall, 55% felt “very well informed” about the housing market before they started looking for an apartment.
In fact, they were more likely to describe themselves as “very knowledgeable” about the housing market (64%) than about the US economy (54%), the upcoming 2022 midterm election (54%), or the Marvel Cinematic Universe (53%). .
However, some misconceptions persist – such as one in three (34%) believes it is impossible to change the interest rate on a home loan when in reality mortgage refinancing is a common practice among lenders.
“We like to say marry the house, but date the rate,” Elkins said. “That’s why building a long-term relationship with your lender is crucial. We are there for you when it is time to refinance at a lower interest rate or better terms.”
Two-fifths (41%) also incorrectly claimed that if the bank or lender goes bust, you don’t have to pay off the rest of your mortgage.
Regardless of their current home ownership status, 45% of respondents said they plan to buy a new home in the next three to five years – and the panel’s homeowners had a sobering piece of advice.
“Evaluate the current economic situation before you buy,” offered one respondent. “See where things are and maybe wait if it’s not the right time.”
“Prepare yourself for an emotional nightmare,” wrote another. “Have more money than you think you’ll need, [and] a good relationship with your banker.”
No wonder then that 68% think trying to get a mortgage today in today’s housing market would make them “very anxious”.
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“First-time homebuyers should prepare for this [a] stressful trip but good to have money on hand,” admitted one.
MOST POPULAR HOUSE STYLES:
Ranch – 21 %
Cape Cod – 15 %
Colonial – 9%
Artisan – 7%
Bungalow – 5%
Contemporary – 4%
Tudor – 4%
Victorian – 3%
Modern farmhouse – 3%
Split-Level – 3 %
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