A recent survey found many prospective and current homebuyers lack a solid understanding of homebuying basics.
We’ve long believed that educated homebuyers are stronger homebuyers. For many veterans and military members a home represents the biggest purchase of their lives. Understanding the homebuying process, the advantages of VA loans and the potential pitfalls out there can ensure military buyers save time and money and maximize their hard-earned benefits.
A recent survey from real estate website Zillow illustrates why continued education and awareness is so critical.
Homebuyers didn’t know the answer to a third of the basic mortgage and homebuying questions presented to them during a Zillow Mortgage Marketplace survey. Current and prospective homeowners were misinformed on a variety of topics, from down payments and interest rates to lender fees and refinance.
Let’s run through some of the recurring errors and why these are so important to know.
Save and Shop Around
Some of the misconceptions and misunderstandings surrounding the mortgage process may have directly impacted a borrower’s bottom line. The survey found that:
- 34 percent of first-time buyers didn’t know they could possibly get a mortgage with a down payment of 5 percent or less
- 26 percent of borrowers thought they had to close their loan with the lender that issued their preapproval
- 24 percent of buyers assumed their personal bank will always offer the best rates and terms
Interest Rates
A third (34 percent) of the homebuyers polled couldn’t explain the term “annual percentage rate,” or APR. This rate reflects the true cost of borrowing because it includes the mortgage interest rates as well as other costs and fees attached. When shopping around prospective buyers want to compare APR figures rather than the basic mortgage interest rate.
Half of those surveyed didn’t know that mortgage rates fluctuate daily. That’s why it’s important to get consistent rate quotes and talk with your loan specialist about how to lock your VA loan rate.
Foreclosure
Borrowers who’ve experienced a foreclosure may be missing out because of misinformation. A third (31 percent) of homeowners assumed they had to wait a minimum of seven years after a foreclosure or short sale to purchase again. Depending on the loan type it can be as little as two years following a foreclosure, as is the case with VA loans. Some lenders, including Veterans United, won’t have any required waiting period following a short sale in most cases. Military borrowers who experienced an FHA foreclosure will likely need to wait three years before purchasing with a VA loan.
Refinance
About a third (34 percent) thought they could only refinance once in a 12-month period. Twenty percent didn’t know there were refinance options available for homeowners who are underwater, which means they owe more than the home is worth. The Home Affordable Refinance Program (HARP) was created to help underwater homeowners with mortgages backed or owned by Fannie Mae or Freddie Mac.
Knowledge is Power
Education can save you a ton of money, not to mention headaches and hassles. It’s important to understand the options available to you, especially when you’re considering using your VA home loan benefits. You can talk with a Veterans United loan specialist about your options at 855-524-7279.
Photo courtesy of jeffweese