In an effort to understand just how knowledgeable borrowers are when it comes to the mortgage process, FreeandClear.com recently conducted a survey asking questions ranging from, “What source have you learned the most about the mortgage process?” to “Who is Fannie Mae?”
Fortunately, the survey results showed that only 10 percent of borrowers answered incorrectly when asked who Fannie Mae is, and although the survey threw in this question to bring some comic relief, the report notes that borrowers should pay closer attention to Fannie Mae given its importance to the mortgage process.
Breaking down more serious results, 20 percent of borrowers think it is impossible to buy a home with a down payment of less than 5 percent—despite the many low and no down payment mortgage programs provided by the Federal Housing Administration, the U.S. Department of Veteran Affairs, and the U.S. Department of Agriculture, along with conventional programs that allow a buyer to make a downpayment of 3.5 percent or lower.
This survey result is notable as saving for a down payment is often cited as one of the biggest obstacles to buying a home. Whether respondents have incorrect ideas about how much money is required to put down to buy a home or are simply unaware of assistance programs—education is essential to increasing homeownership.
So how are borrowers learning about mortgages? According to the results, many borrowers are turning to the Internet or their lender to learn about the mortgage process—24 percent of respondents selected both the Internet and their lender when asked from what source they have learned the most about the mortgage process. Only 2 percent learned from the Consumer Financial Protection Bureau.
Shopping multiple lenders is probably the best way to save money on a mortgage, but the survey found that 64 percent of borrowers compared only one or two lenders when they got a mortgage— which means they may not be aware of the full range of mortgage options available.
In one category, borrowers seem to be more conservative than mortgage guidelines when it comes to how much income should be spent on a monthly housing expense, as half of the respondents said 34 percent of their gross income should be spent on housing.
The survey notes some optimism of this finding, as only 6 percent of borrowers said you should spend 62 percent of your monthly gross income—at least there is a relatively low number of respondents thinking it is necessary to spend an overwhelming amount on housing and debt expenses.
To view the full survey, click here.