Have you owned a home for a long time? Have you taken out several mortgage loans in your lifetime, and even refinanced once or twice? Do you make a mortgage payment every month now?
While that may describe the typical American family, there is still a general lack of knowledge when it comes to home loans, mortgage terms, and the process of borrowing money when you purchase a house.
So we decided to compile this quick and (relatively) easy mortgage quiz for you. Good luck, and look for the answers below.
- What are some of the benefits of homeownership?
A) Mortgage interest is tax deductible
B) Homes may go up in value while you pay the loan balance down.
C) You can improve a home, enhancing its value.
D) All of the above.
- If want a loan that has the same payment every month for the life of the loan, which home loan would be best for you?
A) 30/15 balloon loan
B) 30-year fixed loan
C) 5/1 LIBOR ARM
D) 2/28 ARM
- Borrowers have scores from the three major credit reporting agencies. Which one is used to qualify for a home loan?
A) The minimum of the 3 scores.
B) The maximum of the 3 scores.
C) The middle of the 3 scores.
D) The average of the 3 scores.
- If a borrower’s house is worth $300,000 and they’re looking to take out a mortgage for $270,000, the loan-to-value is:
A) 100%
B) 50%
C) 90%
D) 75%
- Paying “points” is like prepaying interest, allowing you to get a lower rate on your mortgage. Typically, each point is:
A) 1% of the mortgage amount.
B) .1% of the mortgage amount.
C) 2% of the mortgage amount.
D) 10% of the mortgage amount.
- Which of the following is considered a sub-prime credit score?
A) 800
B) 780
C) 660
D) 540
- The acronym “PITI” includes what elements in your mortgage payment?
A) Principal, taxes, home insurance
B) Principal, interest, taxes, home insurance
C) Principal, taxes
D) Principal, taxes, interest
- Private Mortgage Insurance (PMI) is insurance that protects ________ in case you do not pay.
A) You, the homeowner
B) The government
C) The lender
D) Your Realtor
- When comparing the cost of different loan options, it’s best to look at each loan’s interest rate, not the Annual Percentage Rate (APR).
A) True
B) False
- A home inspection is only a good idea if:
A) It’s always a good idea to get a home inspection.
B) It’s an older home.
C) It’s not new construction.
D) The sellers disclose that something is seriously wrong with it.
- An appraisal is…
A) The accurate price of the home.
B) A professional estimate of the home’s fair market value.
C) The amount the lender thinks the home is worth and will lend you.
D) All of the above.
- What documentation will NOT be required to bring in to your mortgage broker to get prequalified?
A) Paycheck stubs
B) Tax returns
C) Credit report
D) Credit card statements
- Your Debt-to-Income Ratio is a measure of…
A) All of your current debt balances compared to your total assets.
B) The total monthly payments in your budget, including for food, clothing, gas, etc. against your income.
C) Your total monthly payments for all revolving debt that shows on your credit report and any real estate/mortgage payments.
D) None of these.
- When buying a house, a down payment of 20% or more allows you to:
A) Qualify for a better interest rate than if you put less down.
B) Start with equity in your home.
C) Avoid paying private mortgage insurance.
D) All of the above.
- Which term refers to the holding of funds and documents by a third party prior to closing?
A) Earnest Money
B) Escrow
C) Amortization
D) Title company
***
How did you do?
- If you got at least 10 out of 15 correct, you have an average knowledge of mortgages,
- 12 out of 15 you have an excellent knowledge,
- and 14 or 15 out of 15 you must be a pro!
Here are the answers:
- D) All of the above
- B) 30-year fixed loan
- C) The middle of the 3 scores.
- C) 90%
- A) 1% of the mortgage amount.
- D) 540
- B) Principal, interest, taxes, home insurance
- C) The lender
- B) False
- A) It’s always a good idea to get a home inspection.
- B) A professional estimate of the home’s fair market value.
- D) Credit card statements
- C) Your total monthly payments for all revolving debt that shows on your credit report and any real estate/mortgage payments.
- D) All of the above.
- B) Escrow