New data shows Americans are as baffled by how real estate works as they are by cryptocurrency. According to a new Zillow poll, most Americans know more about celebrity love lives, the Kardashians and the NFL than they do the basics of home buying.
In the nationwide survey, the typical adult failed Zillow’s basic real estate quiz, answering just two out of five questions correctly.
Financing is a crucial first step when buying a home, but it’s also one of the most confusing. Two-thirds of survey respondents don’t understand the benefits of pre-approval for a mortgage.
The benefits of pre-approval can include being able to close a home quicker, get clear budget constraints, and make an offer that is more attractive to a seller. A lower interest rate is not a benefit of pre-approval, as the majority of respondents believed.
Determining a down payment amount and when to purchase Personal Mortgage Insurance (PMI) is an important financial decision to make when buying a home because it can have a major impact on your monthly payment. Many respondents assumed that PMI would be required in all cases, but the only case where it is not required is on a traditional loan with a down payment of 20% or more.
Most US adults answered correctly that a person’s payment history affects their creditworthiness and that the purpose of a rating is to determine if the home is worth the purchase price.
But when it comes to the love lives of celebrities, the Kardashians, and the NFL, Americans know more, even if their lives and finances aren’t directly affected. The typical survey taker correctly answered three out of five questions in each of these categories.
Nearly 85% of respondents knew that Kim Kardashian has four children with Kanye West, and 70% answered correctly who Jennifer Lopez is now engaged to after they first split 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 confused by real estate as he is by the complex world of cryptocurrency, only answering two out of five questions correctly.
“The real estate process can be complicated and confusing, but it doesn’t have to be,” said Amanda Pendleton, expert at Zillow Home Trends. “By educating buyers on basic property fundamentals and hiring experts to guide them through the process, they can avoid costly pitfalls and put themselves in a stronger competitive position. When it comes to choosing the right home, real estate technologies like interactive floor plans bring information closer to the average buyer’s fingertips than ever before, helping them move around quickly and confidently.”
Here are five tips to help buyers with home shopping:
- Understand what you can afford. Buyers should start with a mortgage calculator and Zillow’s affordability tools to understand what goes into a mortgage payment and what they can realistically afford on a monthly basis.
- Check if you are eligible for deposit assistance. Finding enough money for a down payment is a common obstacle to buying a home. Aspiring buyers can see which down payment assistance programs are available for each property listing on Zillow.
- Find an agent you trust. Zillow’s agent locator tool helps buyers find the best agent for their specific needs. Buyers can read reviews from top real estate agents in their area and contact them directly through the tool.
- Get pre-approved – not just pre-qualified – for a mortgage. It’s a broader financial check, but the pre-approval gives the buyer – and the seller – more confidence in the buyer’s ability to finance the home. A new Zillow survey found that 86% of sellers prefer a buyer who is pre-approved rather than pre-qualified for a mortgage. Buyers can start the pre-approval process online.
- Find a lender. Research by Zillow shows that some homebuyers can save tens of thousands of dollars over the life of their loan by shopping around for the best mortgage rate. Buyers can compare interest rates and fees for multiple lenders on Zillow’s online mortgage marketplace.
To read the full report including graphs and methodology, click here.