Zillow: One-Third of Homebuyers Lack Basic Mortgage Knowledge

With mortgage rates low and affordability relatively high, the housing market is seeing buyers return in force--unfortunately, many of those would-be owners are woefully unprepared and misinformed when it comes to taking out a mortgage, ""Zillow"":http://www.zillow.com/ discovered in a recently released survey.

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According to Zillow, homebuyers participating in its Mortgage Marketplace Survey answered basic questions on mortgage information incorrectly nearly one-third (32.5 percent) of the time.

For example, 34 percent of first-time homebuyers are not aware that they might be able to get a home loan with a down payment of less than 5 percent. According to Zillow, the number of lenders on the company's Mortgage Marketplace that quote loan requests with a down payment between 3.5 and 5 percent has risen by 570 percent over the past two years.

In addition, homebuyers seem not to understand how to secure the best possible interest rate and loan terms. Twenty-six percent of homebuyer respondents believe--incorrectly--they are obligated to close their loan with the lender the pre-approved them. Separately, 24 percent believe the best interest rates and fees can always be found through the bank with which they currently do business.

""All too often buyers focus on renegotiating a lower home price and ignore the importance of finding the right loan. If a home buyer can lower their interest rate by even half a percentage point, they can not only increase their purchasing power, but save thousands of dollars over the life of the loan,"" said Erin Lantz, director of mortgages for Zillow.

Prospective buyers aren't the only group who demonstrated a lack of basic mortgage knowledge.

According to Zillow, an estimated 14 million homeowners (about one in five) said they did not believe underwater borrowers could refinance. (According to the ""latest data"":https://themreport.com/articles/mortgage-rates-continue-to-attract-harp-activity-in-february-2013-05-07 from the Federal Housing Finance Administration, nearly 2.4 million underwater borrowers had refinanced through the Home Affordable Refinance Program as of the end of February 2013.)

Separately, 47 percent of current homeowners incorrectly believe they must wait at least one year between refinancing.

In an effort to educate potential and current homeowners, Zillow is offering an online ""Mortgage IQ Quiz"":http://www.zillow.com/mortgage-rates/quiz/ that contains detailed information on common mortgage misperceptions.