According to a new Zillow survey, most Americans know more about celebrity love lives, the Kardashians and the NFL than they know about the basics of buying a home. In the nationwide survey, the typical adult failed Zillow's basic real estate knowledge quiz, answering only two of five questions correctly.
Financing is a crucial first step in the home-buying process, but it's also one of the most confusing. Two-thirds of survey respondents don't understand the benefits of getting pre-approved for a mortgage. Advantages of having pre-approval can include closing on a home faster, getting clear budget constraints and making an offer that's 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 private mortgage insurance (PMI) is required is an important financial decision to make when purchasing a home, as it can have a big impact on the monthly payment. Many survey respondents assumed PMI is required no matter what, but the only instance when it's not required is on a conventional loan with a down payment of 20% or more.
Most U.S. adults correctly answered that a person's payment history impacts their credit score, and that the purpose of an appraisal is to determine if the home is worth its purchase price.
But when it comes to celebrity love lives, the Kardashians and the NFL, Americans are more in the know, even though their lives and finances aren't directly impacted. The typical survey respondent answered three of five questions correctly in each of these categories.
Nearly 85% of respondents knew that Kim Kardashian has four children with Kanye West, and 70% correctly answered whom Jennifer Lopez is now engaged to after first breaking up in 2004 (answer: Ben Affleck). And on the topic of football, the typical American knows a lot about Tom Brady; 71% of respondents knew that the popular quarterback left the New England Patriots to play for the Tampa Bay Buccaneers.
The typical American is as baffled by real estate as they are by the complex world of cryptocurrency, answering just two of five questions correctly.
"The real estate process can be complicated and confusing, but it doesn't have to be," said Amanda Pendleton, Zillow home trends expert. "By educating themselves on basic real estate fundamentals and hiring experts to help guide them through the process, buyers can avoid costly pitfalls and put themselves in a stronger competitive position. When it comes to picking the right home, real estate technology like interactive floor plans puts information closer to the average buyer's fingertips than ever before, helping them move quickly and with confidence."
Here are five tips to help buyers through their home-shopping journey:
1. 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.
2. See if you qualify for down payment assistance. Coming up with enough money for a down payment is a common barrier to homeownership. Aspiring buyers can see which down payment assistance programs may be available on every home listing on Zillow.
3. Find an agent you trust. Zillow's agent finder tool helps buyers find the best agent to fit their specific needs. Buyers can read reviews of top-rated real estate agents in their area and reach out to them directly through the tool.
4. Get pre-approved for a mortgage - not just prequalified. It's a more extensive financial check, but pre-approval will give the buyer - and the seller - more confidence in the buyer's ability to finance the home. A new Zillow survey finds 86% of sellers prefer a buyer who has been pre-approved, as opposed to pre-qualified, for a mortgage. Buyers can start the pre-approval process online.
5. Shop around for a lender. Zillow research indicates some home buyers can save tens of thousands of dollars over the length of their loan by shopping around for the best mortgage rate. Buyers can compare rates and fees for multiple lenders on Zillow's online mortgage marketplace.