It may be surprising to hear that after the extensive process of shopping for a home, many buyers neglect to shop around for a mortgage. This information comes from a recent survey by real estate website Zillow. The survey asked more than 1,000 homeowners and people who were looking to buy homes questions about their mortgage and their mortgage process, and the results were surprising to many.
For example, more than one-third of the people surveyed did not know what the initials APR stand for, even though it is a major and important term on every mortgage contract. The “annual percentage rate” is a crucial element of a mortgage to understand, yet many people lack and understanding of it and other basics of the mortgage process. And while the details could seem boring to the average Florida borrower, the truth is that the devil can lie in the details, and an unfavorable mortgage contract could end in heartache and even a foreclosure.
For example, understanding the interest rates involved in a mortgage contract could mean the different between being able to successfully maintain payments over the length of the loan or having to face default and a possible short sale, foreclosure, or bankruptcy. Some mortgage contracts start with a low-interest rate and then allow for an adjustment after a period of time, which may sound fine at the start but could become problematic if market conditions change and the rate sprockets, increasing monthly payments.
When the unexpected does happen and homeowners are unable to make their mortgage payments, there are other options such as declaring bankrupcy, which can allow families to stay in their homes.
Source: CNN, “Homebuyers clueless about mortgages,” Les Christie, May 9, 2013.