A home is the biggest purchase most people make in their lives, but a recent MoneyWise survey suggests Americans know alarmingly little about the process.

Over 56% of respondents to a recent MoneyWise survey flunked a quiz of common homebuying terms, including “mortgage rate” and “down payment.”

The survey of 1,116 people spanned generations, and while younger respondents, including first-time homebuyers, struggled more, most quiz takers well into their 40s and 50s still received an F.

That matters because staying sharp and picking the right strategy during the homebuying process can mean the difference between saving or wasting thousands of dollars over time.

The survey explores how strategies vary among respondents of different generations and income brackets, where people are getting their information from and how their choices may come back to haunt them.

Key Takeaways

  • Less than a quarter of Gen Z respondents — from the youngest generation buying homes today in their early 20s — could pass a quiz on common homebuying terms.
  • Forty percent of non-homeowners plan to save a down payment ranging from 6% to 12% of the asking price, but nearly 78% of homeowners report putting 20% or more down on their first home purchase.
  • Nearly 71% of respondents who took on a 15-year loan for their first home regret it, while only 27% of those with a 30-year loan feel the same.
  • Friends and family (61%), real estate experts (58%) and online articles (47%) are Americans’ most common sources of information.

Mortgage survey 2022
Steven Twigg / MoneyWise

A generational divide in home know-how

Over half of those surveyed failed the mortgage literacy quiz. Only baby boomers, who may have had more homebuying opportunities and experiences than other generations, typically passed.

Gen Z — generally defined as people born during or after the mid- to late ’90s — is by far the least knowledgeable about the topic, with just 6% receiving an A grade.

Only 28% of Gen Z respondents could accurately define the term “mortgage rate.” In fact, there wasn’t a single term that more than half of Gen Z could define correctly.

Understanding mortgage rates seems to be the most difficult concept among all generations, followed by the concept of interest. “Closing costs” is the phrase respondents most often defined correctly.

Mortgage survey 2022
Steven Twigg / MoneyWise

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Holding out hope for a small down payment

Current homeowners report saving far more aggressively for the down payments on their first home compared with the amount aspiring homeowners plan to save.

Those who already own a home report saving up $66,400 on average, with non-homeowners planning to save $39,600.

Today’s historically low mortgage rates may play a role, as it’s less costly than it has been to take on more debt, but rates are expected to rise significantly in the near future.

While three-quarters of homeowners report putting down at least 20% on their home, less than 1 in 5 aspiring homeowners plan to do the same. The same portion of aspiring buyers anticipate putting down 13% to 19%.

In reality, the National Association for Realtors says 7% is more common for a first-time homebuyer and 17% for repeat homebuyers.

Mortgage survey 2022
Steven Twigg / MoneyWise

There’s no take-backs with banks

Homeowners have plenty of options when taking out a loan, though some may lead to more regret than others, the survey found.

Seventy-eight percent of respondents with adjustable-rate mortgages came to regret their decision, while only 55% of those with a fixed rate felt the same.

Adjustable-rate mortgages are attractive initially, but after the predetermined fixed-rate period is over, the loans’ interest rates can change over time, potentially leading to higher payments and, according to the survey findings, a lot of buyer’s remorse.

Another impactful decision is loan length. While each loan term has its own pros and cons, 71% of those surveyed who gravitated toward a 15-year loan regretted their decision.

Those who chose 30-year mortgages, which come with a much lower monthly payment but higher lifetime interest costs, were the least regretful of their decision.

Though these choices matter a great deal, homebuyers have come under increasing pressure to move quickly. With prices rising and mortgage rates bottoming out, around 70% of recent homebuyers in the survey say they rushed their decision.

Mortgage survey 2022
Steven Twigg / MoneyWise

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Good or bad, advice is everywhere

In this challenging environment, where are homebuyers turning for guidance? People have far more options than they once did.

Gen Z respondents are more tuned in than other generations to social platforms such as Reddit and TikTok, where they can receive information on a wealth of subjects from mortgage rates to makeup. The advice of banks, at least for now, holds little appeal to them.

Many homebuying professionals are reacting to the shift by finding new clients where they spend time. It’s not unusual to see real estate agents jumping on TikTok to advertise their listings.

Baby boomers — people at or near retirement age, who scored an A or B on the homebuying literacy quiz about half the time — are more likely to embrace real estate experts and are least impressed with social media as a source of homebuying info.

Finally, respondents young and old say they lean on the experiences of family and close friends. These trusted allies should always have your best interests at heart — however, considering how common an F grade was in the MoneyWise quiz, it may be prudent to ask how they know what they say they know.

Methodology and limitations

For this study, MoneyWise partnered with a polling agency to present online surveys to 1,116 Americans. Specifically, 727 respondents were non-homeowners, and 389 were homeowners.

Of all respondents, 56.5% identified as men, 42.9% identified as women, and the remaining 0.6% identified as nonbinary. The average age of all respondents was 40.4 years old. Generationally, 23.2% were baby boomers, 25.8% were Gen X, 23.5% were millennials, and the remaining 27.5% were Gen Z.

Data are solely representative of self-reporting. The margin of error for the homeowner sample within this study based on the U.S. population of homeowners is 5%, with a 95% confidence level.

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The information about mortgage literacy on this page is available to share for noncommerical use. If you cite or republish any of the information, please link back to this page.

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About the Author

Kevin Hamilton

Kevin Hamilton

Senior Associate Editor

Kevin Hamilton is a senior associate editor at MoneyWise. An award-winning graduate of Ryerson University’s school of journalism, Kevin has made his mark at a number of publications including Metro, the Toronto Star, the Huffington Post, Toronto Life and the National Observer.

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