Despite the efforts of housing counselors, real estate agents, mortgage lenders and the Consumer Financial Protection Bureau (CFPB), many Americans lack basic knowledge of mortgages and the home-buying process.
A recent survey by FreeandClear.com, a site that provides mortgage education, found that 20 percent of borrowers think it is impossible to buy a home with a down payment of less than 5 percent. Yet the FHA loan program requires just 3.5 percent, VA loans have no down payment requirement and conventional loans are available with 3 percent down payment options.
The primary source of information about mortgages, as with most subjects today, is the Internet, with 24 percent of borrowers researching mortgages on various sites. However, just 2 percent of borrowers said they learned about mortgages from the CFPB.
Borrowers are frequently advised to shop around for a home loan, but the survey found that 30 percent chose to work with their existing bank and 29 percent chose a lender based on their real estate agent’s referral.
Both of those could be excellent choices as long as the borrower shops around to ensure they are getting the best deals.
In one category, borrowers appear to err on the side of caution when borrowing, which is a positive outcome. When asked what percentage of a buyer’s gross income should be spent on housing costs and all other debt repayment, half answered 34 percent, which is lower than the maximum allowance of 43 percent for most mortgages.
While understanding your personal home financing is essential, the survey also asked about whether borrowers know about the role of Fannie Mae in mortgage financing.
Most people know about Fannie Mae’s role in supporting home loans by guaranteeing the mortgages, but 11 percent answered incorrectly, with 6 percent identifying Fannie Mae as the first female senator.
For the complete survey and an array of mortgage calculators and information, click here.
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