Many Boston Home Buyers Remain Clueless

BostonMany Boston area home buyers are clueless regarding mortgages home buyers have been flocking to the market in droves this past year, trying to take advantage of affordable prices and record-low mortgage interest rates while they still can.

When it comes to applying for a mortgage — the most important aspect of the home-buying process — recent surveys found that about one in three buyers have no idea what they’re doing.

In today’s market, where the low supply of listings and bidding wars require swift decision-making, it’s pretty unsettling that few buyers come in well-prepared. And considering the fact that the housing crisis was largely attributed to homeowners who took on mortgages they couldn’t afford, buyers apparently haven’t learned many lessons.

Boston Home Buyers Need Education

Here are some key findings from the recent unrelated reports by Zillow and the Yale Law Journal study:

  • One-third of about 1,000 potential buyers who took Zillow’s Mortgage IQ Survey did not know they could get a mortgage with less than 5 percent down. (The minimum down payment for FHA loans is 3.5 percent and VA loans can be obtained with zero down.)
  • One-third of buyers incorrectly believe that all lenders are required by law to charge the same fees for credit reports and appraisals.
  • 26 percent of buyers thought they were obligated to stay with the lender that pre-approved them (not so) while 24 percent believed the best interest rates and fees are only obtained through their own bank (again, not true).
  • The Yale study, conducted over three years, also found that 31 percent of its participants did not understand the basic principals of a mortgage, and many didn’t even bother to read the terms of the documents they were signing.
  • Nearly one-third of participants who read a lender disclosure form didn’t know the loan being presented had an adjustable rate, despite the fact that the form clearly specified so.
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If you’d like to see how prepared you are to join the ranks of Boston home buyers, take Zillow’s 10-question mortgage quiz.

Get more Boston Mortgage Information here.

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