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Mortgage basics escape many home buyers, Zillow says

A year ago, Michelle and Nilson Ruiz worked

A year ago, Michelle and Nilson Ruiz worked with a Wells Fargo home mortgage consultant, Michael Carreras, on an application for a down payment assistance grant during an event at the Miami Airport Convention Center. Credit: Getty Images, 2012

Do you know enough about mortgages to make a home purchase? According to  Zillow, there's a good chance you don't.

The online real estate firm gave an eight-question quiz on mortgage basics to a nationally representative sample of prospective and current homeowners, and 32.5 percent of respondents couldn't answer them all correctly.

How basic?

Well, a full 34 percent of those surveyed were unaware that buyers can be eligible for mortgages with a down payment of less than 5 percent. (In fact, the minimum down payment on certain loans backed by the Federal Housing Administration is 3.5 percent.)

One in five respondents to Zillow's survey didn't know that underwater borrowers could refinance, despite numerous federal programs initiated and promoted by the Obama administration and the states aimed specifically at relieving such homeowners.

Of course, prospective homeowners who step up to the buying table unarmed with basic mortgage information risk missing out on thousands of dollars in potential savings.

"If a home buyer can lower their interest rate by even half a percentage point, they can not only increase their purchasing power, but save thousands of dollars over the life of the loan,” Erin Lantz, director of mortgages for Zillow, said in a statement.

Worse, perhaps, underwater borrowers ignorant to the latest refinancing rules may be losing opportunities to reduce the burden of their debt load and line their pockets with some extra spending money each month.

How familiar are you with basic mortgage rules? Take Zillow's mortgage quiz yourself: 

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