The mortgage process is incredibly confusing to the majority of first-time homebuyers according to a new survey by Ally Home. About nine out of ten consumers said they are unsure about the size of mortgage they can afford or how to qualify for a mortgage.
- About 92% of consumers admitted they don’t know how much mortgage they can afford
- Only 32% were aware of the average home mortgage closing costs
- Consumers are also confused by mortgage “rates” versus “points” and debt-to-income ratios
The average consumers starts contacting real estate agents and looking for home before they know much of anything about mortgages. According to a new survey by Ally Home, more than nine out of ten consumers said they began looking for homes before knowing how much mortgage they could afford.
“When it comes to major financial investments, such as a home, it’s critical consumers have a solid grasp of the basics,” says Diane Morais, president of Consumer and Commercial Banking Products at Ally Home. “It can seem overwhelming at first, but by mastering just a few of the fundamentals, home buyers can put themselves in a much better position to win and secure the mortgage that’s right for them.”
Specific findings from the survey include:
- Only 8% of people were aware that the maximum debt-to-income ratio is typically 43%; most thought it was significantly lower or were unable to hazard a guess.
- Nearly two in five consumers (39%) believe mortgage applicants who plan to stay in a home short-term should look for low points to have the lowest mortgage payment
- More than half of consumers (55%) say low rates are what applicants should look for if they plan to stay long-term.
- About one-third (32%) of US adults know the average home mortgage closing costs are in the 1-5% range of the home’s total purchase price. Most thought higher or just didn’t know at all.