New data shows that Americans are as confused about how real estate works as they are about cryptocurrency. According to a new Zillow surveythe study reveals that most Americans know more about the love life of celebrities, the Kardashians and the NFL than the basics of buying a home.
In the national survey, the typical adult failed Zillow’s Real Estate Basics Quiz, answering only two out of five questions correctly.
Financing is a crucial first step in the home buying process, but it’s also one of the most confusing. Two-thirds of survey respondents do not understand the benefits of getting pre-approved for a mortgage.
The benefits of having pre-approval can include closing a home faster, getting budget constraints clear, and creating a more attractive offer for a seller. A lower interest rate is not a benefit of pre-approval, as believed by the majority of respondents.
Determining how much to downpay and when private mortgage insurance (PMI) is required is an important financial decision to make when buying a home, as it can have a big impact on the monthly payment. Many survey respondents assumed that PMI was necessary no matter what, but the only case where it’s not necessary is a conventional loan with a down payment of 20% or more.
Most American adults answered correctly that a person’s payment history impacts their credit score and that the purpose of an appraisal is to determine if the home is worth the purchase price.
But when it comes to celebrity love lives, the Kardashians and the NFL, Americans are more in the know, even if their lives and finances aren’t directly affected. The typical respondent correctly answered three of the five questions in each of these categories.
Nearly 85% of respondents knew that Kim Kardashian had four children with Kanye West, and 70% correctly answered who Jennifer Lopez is now engaged to after her first breakup in 2004 (answer: Ben Affleck).
When it comes to football, the typical American knows a lot about Tom Brady; 71% of respondents knew the popular quarterback left the New England Patriots to play for the Tampa Bay Buccaneers.
The typical American is as baffled by real estate as he is by the complex world of cryptocurrency, answering only two out of five questions correctly.
“The real estate process can be complicated and confusing, but it doesn’t have to be,” said Zillow Home Trends expert Amanda Pendleton. “By educating themselves on real estate fundamentals and hiring experts to guide them through the process, buyers can avoid costly pitfalls and put themselves in a stronger competitive position. When it comes to choosing the right home, real estate technology like interactive floor plans puts information closer than ever to the fingertips of the average buyer, helping them to act quickly and confidently.”
Here are five tips to help buyers through their home buying journey:
- Understand what you can afford. Buyers should start with a mortgage calculator and Zillow’s accessibility tools to understand what goes into a mortgage payment and what they can reasonably afford on a monthly basis.
- See if you qualify for down payment assistance. Finding enough money for a down payment is a common obstacle to home ownership. Aspiring buyers can see what down payment assistance programs may be available on each home listing on Zillow.
- Find an agent you trust. Zillow’s Agent Finder helps buyers find the best agent to meet their specific needs. Buyers can read reviews from top-rated real estate agents in their area and contact them directly through the tool.
- Get pre-approved for a mortgage, not just pre-qualified. This is a more thorough financial check, but pre-approval will give the buyer – and the seller – more confidence in the buyer’s ability to finance the home. A new Zillow survey reveals that 86% of sellers prefer a buyer who has been pre-approved, as opposed to pre-qualified, for a mortgage. Buyers can start the pre-approval process online.
- Shop around to find a lender. Zillow research indicates that some homebuyers can save tens of thousands of dollars over the life of their loan by finding the best mortgage rate. Homebuyers can compare rates and fees from multiple lenders on Zillow’s online mortgage marketplace.
To read the full report, including charts and methodology, Click here.
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