Within the first few minutes of conversation, an agent probably begins, almost unconsciously, to plan a strategy for financing your purchase. Those seemingly impertinent questions about your salary, cash on hand, and present debts are important in helping you find the right way to buy your home.
Finance Pop Quiz
1.According to most mortgage lenders, you could qualify for a mortgage amount of about four times your gross annual salary. A. True B. False 2.What is the maximum amount that homeowners may borrow to purchase and/or improve a first and/or second home, and take full federal income tax deduction for the interest?
A. $100,000
B. $1 million
C. $500,000
D. There is no limit.
3.A 15-year fixed-rate mortgage saves you nearly 60 percent of the total interest costs over the life of the loan when compared to a 30-year fixed-rate mortgage. A. True B. False
4.Mortgage lenders refer to a homeowner’s monthly payment as “PITI” because: A. Homeowners should be pitied because of their monthly payments. B. It includes principal, interest, taxes, and insurance payments. C.Piti is French for mortgage payment. D.PITI is short for “Pay It on Time In full.” 5. A jumbo loan is:
A. A mortgage that is really too big for you to afford
B. A loan that you pay monthly for a time and then pay one “jumbo” payment on the remaining principal
C. A mortgage that is larger than the limits set by Fannie Mae (Federal National Mortgage Association) and the Federal Home Loan Mortgage Corporation (Freddie Mac)
D. A loan to buy a house with more than four bedrooms
6. A buydown refers to:
A. A discount on the home price so you can afford it
B. A discount on the loan’s interest rate during the first years of the loan to make financing easier to qualify for
C. The purchase of a home in a southern resort area
D. Buying a cheaper house than you live in now; also called a trade-down 7.Typical closing costs can range from:
A. 1–3% of the loan amount
B. 3–8% of the loan amount
C. 8–10% of the loan amount
D. 10–15% of the loan amount
8. A biweekly mortgage (a loan on which you pay half the monthly payment amount every two weeks) shortens the life of a fixed-rate 30-year loan by about: A. 7years B. 5 years C. 15 years D. It doesn’t shorten the life of the loan; it just decreases interest costs.
9. A convertible mortgage is one that
A. Allows you to buy a car with the house.
B. Allows the homeowner to decrease the loan’s interest rate without refinancing the mortgage.
C. Can be used like a giant credit card. D. Allows you to make an adjustable-rate mortgage into a fixed-rate mortgage. 10. Lenders normally recommend refinancing a mortgage if:
A. The market rate is two or more percentage points below the rate on the loan.
B. The homeowner has no equity in the property.
C. The homeowner doesn’t want to pay any taxes.
D. The homeowner has a convertible mortgage.
11. Mortgages backed by the Federal Housing Administration (FHA) require what size down payment?
A. 0% (nothing down)
B. About 3–5% of the loan amount
C. About 10–20% of the loan amount
D. More than 20% of the loan amount
12. When discussing points, your lender means:
A. The things you really like about your new house
B. Prepaid interest; each point equals 1 percent of the loan amount
C. A rating system used by lenders to qualify applicants
D. The number of traffic violations that show up on your credit report
13. What is a deed of trust?
A. Money you receive before you have actually qualified for the loan
B. A special document waiving your right of rescission
C. A document used in place of a mortgage in some states
D. A special mortgage you can get if the lender knows you 14. A VA loan is: A. A long-term, low- or no-down payment loan guaranteed by the Department of Veterans Affairs
B. A loan on a home sold at a discount because it has been “Vacant and Abandoned”
C. A loan on which the homebuyer pays a 1 percent premium
D. A loan for an animal hospital funded by the Veterinarians of America 15. A title search:
A. Examines the homebuyer’s background to see if he or she is descended from royalty
B. Examines municipal records to determine the legal ownership of a property
C. Looks for books in the public library that tell about housing finance
D. Verifies a property’s past owners Answers: 1. False; 2. B; 3. True; 4. B; 5. C; 6. B; 7. B; 8. A; 9. D; 10. A; 11. B; 12. B; 13. C; 14. A; 15. B. Source: Reprinted by permission of the Mortgage Bankers Association of America. |
