During the COVID-19 pandemic, home supply in the residential real estate market has been at record-breaking lows as people snatch up properties thanks to the lowest interest rates since the recession.
While homes are on and off the market for a short period of time, it seems that their buyers aren’t always doing excessive research before the purchase. A study by Rocket Mortgage discovered that 40% of Americans don’t know any home buying terms.
Considering the intricacies of mortgages, most of the U.S. population may be surprised next time they open up their monthly mortgage payments and find out the majority of their payments are going to interest.
So how did Americans stack up against one another during this property proposition?
Millennials Know the Least Home Buying Terms
Despite being the largest generation making home purchases today, millennials knew less home buying terms than any other age group.
Even gen Z has been doing more research than their older counterparts. The report cited that 4% more gen Zers knowing standard mortgage vocabulary than millennials. While gen Z made impressive gains on millennials for their knowledge of mortgages, only 9% of the age group understood what a down payment is — at least they have a few more years before they’ll likely need one. Gen X wasn’t much better, with only 18% responding that they understood what a down payment was.
Unsurprisingly, baby boomers were the age group that reported knowing the most terms. Perhaps being a part of the home buying process for decades longer than their younger counterparts has something to do with their success during the survey.
Women Know More About Mortgages Than Men
Past studies have pointed to women are smarter at investing than men, and that sentiment rings true even for the home purchase process. Turns out, despite outdated stereotypes of men being the breadwinner of families, they are 1.2 times more likely to get confused by mortgage terms compared to women.
The study found:
- A mere 35% of women didn’t know any home-buying terms, the least of any other demographic.
- 41% of men didn’t understand the mortgage terms asked.
The most confusing term for both men and women? Amortization.
Are You Smarter Than Most Americans?
Amortization is the least understood home buying term for Americans, closely followed by an earnest money deposit. Although most people understood the term “down payment”, that still only accounts for nearly half the population.
So how do you fare across your U.S. counterparts when it comes to mortgage terms?
While it can be confusing to understand your mortgage schedule down to a science, it’s important to know how your payments will be allocated throughout the life of your mortgage, known as amortization.
If you’re considering purchasing a home, you need to understand that you’ll pay more in interest versus paying off your principal at the beginning of your loan. As you continue to pay down the principal, the interest payment each month will also decrease.
With the highly competitive market, an earnest money deposit can be the difference between getting the home of your dreams versus losing it to the cash offer next to you. Your earnest money deposit is the check you write to the current homeowner when you make an offer and shows who the serious buyers are.
As you go through the home buying process, you’ll want to know how your money will be spent on the purchase. When calculating your payments, consider taxes and fees like property gains tax and any closing costs you’ll have to pay.
Author: Allan Bangirana
Allan Bangirana has a taste for all kinds of topics and usually writes about tech, entertainment, sports and community projects that make a difference in society.