How much do you know about the process of applying for and securing the correct
mortgage? Whether you are a first-time buyer or a seasoned pro, this quiz will make
the entire process easier for you.
Most lenders will qualify you for 4 times your
annual gross salary. True? Or false? Answer: False. Most lenders agree
that a borrower can afford a home that is 2 to 2 1/2 times gross annual salary.
Homeowners may deduct up to one million dollars
from their federal income tax for mortgage interest. True? Or false?
Answer: True. Homeowners may deduct up to one million dollars for mortgage interest
paid on first and second homes as well as any improvements made to those homes.
Compared to a 30-year mortgage, a 15-year fixed-rate
mortgage can save you nearly 60% on total interest over the life of a loan. True?
Or false? Answer: True. To save interest on a 30-year loan you can make
additional principal payments.
“PITI” is short for "Pay It on
Time In full.” True? Or false? Answer: False. PITI stands for Principal,
Interest, Taxes and Insurance.
A “Jumbo Loan” is a loan with small
monthly payments at the beginning, then one large payment on the remaining principal
amount. True? Or false? Answer: False. A jumbo loan is any mortgage that
is larger than the limit set by FNMA (Fannie Mae) and FHLMC (Freddie Mac). The limit
varies each year due to inflation and current economic trends.
A “buy-down” refers to a discount on
the home price that allows you to buy a bigger house. True? Or false?
Answer: False. A buy-down is a temporary reduction in the loan's interest rate during
the first few years of the loan. This is a good option for buyers who want to qualify
for a more expensive home.
Closing costs can be from 3% to 8% of the total
loan amount. True? Or false? Answer: True. Closing costs depend on the
type of loan. However, 8% of the total loan amount is a safe estimate.
Making one extra mortgage payment each year can
shorten the term of the loan. True? Or false? Answer: True. One extra
mortgage payment each year shortens the loan by approximately 7-8 years.
A "convertible" mortgage allows you to
adjust your loan's interest rate without refinancing your mortgage. True? Or false?
Answer: True. A convertible mortgage allows you to convert an adjustable rate mortgage
into a fixed-rate mortgage for a small fee. If interest rates are falling, this
allows you to lock in a lower rate.
A good time to re-finance is when the market rate
is one or more percentage points below the rate on your loan. True? Or false?
Answer: True. One or more percentage points means that you’ll save money over
what it costs to refinance.
Mortgages backed by the Federal Housing Administration
(FHA) require a down payment of 20 percent of the loan amount. True? Or false?
Answer: False. The down payment required for an FHA loan is usually much lower,
and varies based on several reasons.
Points are what you pay to get a better interest
rate. True? Or false? Answer: True. Equal to one percent of the loan
amount, points are paid at closing and can lower your overall interest rate. Be
sure your lender explains the options available with your loan.
A Veterans Administration (VA) loan is available
only to active members of the military. True? Or false? Answer: False.
Actually, VA loans are available to anyone who is qualified by military service
and other entitlements. Contact your lender to find out if you qualify.
A title search examines local public land records
to determine legal ownership of a property. True? Or false? Answer: True.
A title search determines whether there are any claims or liens on a piece of property
that could prevent a transfer of the property.
