When some young renters get their home-buying education from TikTok, you just know they’re asking for trouble when it comes time to actually purchase that first house. Perhaps that’s why a new survey found a significant knowledge gap between aspiration and reality.
One in four GenZers admitted to pollsters that they turn to the controversial short-form video app to learn how to buy a house. At the same time, one in eight, or around 12%, can't accurately define the term “mortgage,” and two out of five said they are unsure about the meaning of “mortgage rate.”
The knowledge gap isn’t limited to renters, either. What some people who have already reached the ownership stage in their lives know about what they’ve done also leaves something to be desired.
For example, one-third of homeowner respondents don't know their mortgage interest rate, and one in five are unsure of their monthly mortgage payment.
Buying a home is hard, but owning one is difficult, too. To wit, the survey of 1,000 owners, prospective buyers, and renters by JW Surety Bonds found that three out of four owners lacked ownership literacy until after buying their places. Millennials were the most likely to lack an understanding of what it takes to own as opposed to renting.
The poll defines homeownership literacy to include ongoing costs beyond the mortgage (such as property taxes, homeowners insurance, and maintenance), the different types of mortgages and the responsibilities that come with property ownership (like routine maintenance and potential HOA obligations).
It found that more than a quarter of the owners were surprised by unexpected fees during the mortgage process, for example. Yet, the knowledge gap extends to other financial aspects of ownership as well.
For instance, two out of five borrowers were not using an escrow account to pay their property taxes, potentially exposing themselves to large annual tax bills. And just over a third did not have an emergency fund for unexpected home repairs, leaving them vulnerable to financial strain should something of that nature materialize.
The survey, however, found that the lack of intelligence starts long before people become homeowners. Only one-third of respondents said they've budgeted for whatever costs lie ahead, yet two-thirds said they must save for a downpayment before taking the leap.
Meanwhile, more than half of respondents said they need to reach a separate savings goal before feeling ready to buy a home.
