Despite the efforts of housing counselors, real estate agents, lenders and the Consumer Financial Protection Bureau (CFPB), many Americans lack basic knowledge of home loans and the home-buying process. A recent survey by FreeandClear.com, a site that provides mortgage education, found that 20 percent of borrowers think it is impossible to buy a home with a down payment of less than 5 percent. Yet the FHA loan program requires just 3.5 percent, VA loans have no down payment requirement and conventional loans are available with 3 percent down payment options.
The primary source of information about home loans, as with most subjects today, is the Internet, with 24 percent of borrowers researching on various sites. However, just 2 percent of borrowers said they learned about home financing from the CFPB. The survey found that 30 percent chose to work with their existing bank and 29 percent chose a lender based on their real estate agent’s referral. Borrowers appear to err on the side of caution when borrowing. When asked what percentage of a buyer’s gross income should be spent on housing costs and all other debt repayment, half answered 34 percent, which is lower than the maximum allowance of 43 percent for most loans.