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Here are 20 questions based on the information contained in F. C. Tucker's First-Time Homebuyer website. Answers follow at the bottom of the page.
1. Why is it a good idea to pre-qualify for a mortgage loan?
a. It will help you narrow your home search.
b. It assures sellers that you are a serious potential buyer.
c. a and b
d. None of the above
2. The term PITI stands for
a. Points, Income, Title, Interest
b. Principal, Interest, Taxes, Insurance
c. Pre-qualification, Income, Taxes, Interest
d. None of the above
3. Lenders prefer that your mortgage payment comprise less than ____ percent of your gross monthly income.
a. 28
b. 36
c. They don't care; they're more concerned about your credit rating.
d. None of the above
4. Lenders prefer your debt-to-income ratio to be ___ percent or less.
a. 18
b. 28
c. 36
d. 52
5. What options do you have if there are problems on your credit report?
a. None at this time. Begin paying your bills in a timely manner and wait seven years to apply again.
b. If the problem was caused by an error or misunderstanding, you can contact the billing department for that account and have them correct it. Keep good notes.
c. If the problems are associated with a specific incident such as an accident or an illness, you can write the credit bureau to explain the circumstances.
d. b and c
6. How long is negative credit history kept in your file?
a. 2 years
b. 5 years
c. 7 years
d. 10 years
7. How do you determine what to offer on a home?
a. Ask your REALTOR® to search the MLS to find out what other comparable homes have sold for.
b. If you need to make a move quickly and you don't have any other viable options, offer the list price.
c. If the house has just come on the market and similar homes have sold quickly, you might consider offering the list price
d. All of the above.
8. What is the purpose of earnest money?
a. It indicates to the seller that you are serious in your intent to purchase the home.
b. It compensates the seller for taking the property off the market.
c. It covers any expenses the seller might incur if the buyer defaults.
d. All of the above.
9. Your earnest money will be returned to you if
a. you find another home you like better.
b. an inspection reveals a major defect in the home so that you no longer want it.
c. your financing falls through.
d. b and c.
10. The offer to purchase
a. becomes a valid contract as soon as the seller acknowledges acceptance of the offer by signing it.
b. must be notarized.
c. must be delivered within 24 hours or it is void.
d. all of the above.
11. When you borrow money to buy real estate, what do you offer the lender as collateral (security) for the loan?
a. The property you are buying.
b. Additional funds to be held in an escrow account and returned to you at the end of the loan's term.
c. Nothing-real estate loans are unsecured.
d. a and b.
12. What monies might your lender hold in an escrow account for the term of your loan?
a. Payments toward the principal.
b. Your earnest money.
c. Property taxes and homeowner's insurance premiums.
d. None. Lenders don't keep escrow accounts; brokers do.
13. What is the purpose of Private Mortgage Insurance (PMI)?
a. To provide additional security on a loan.
b. To allow borrowers to invest less up front.
c. a and b.
d. None of the above.
14. Which of the follwing statements is true?
a. PMI Payments are made for the life of the loan.
b. PMI Payments stop when the borrower's equity equals 80 percent of the original loan amount.
c. PMI Payments will be reimbursed at the end of the loan.
d. None of the above.
15. One discount point equals
a. one percent of the amount of the purchase price.
b. one percent of the amount being borrowed.
c. $1,000.
d. None of the above.
16. Why is it important to have the home you are buying inspected?
a. By uncovering defects before you move in, the inspection may protect your family and save you a lot of money in the long run.
b. The inspector may be able to quickly repair a minor defect, saving you money and trouble later.
c. a and b.
d. None of the above.
17. If you have an inspection contingency in your sales contract and the inspection reveals that the home needs a new roof, what options do you have?
a. Ask the seller to make the repairs on the home before you close.
b. Ask the seller to compensate you for the cost of replacing the roof.
c. Void your contract.
d. All of the above.
18. Why is it important to verify the chain of title before you buy a piece of real estate?
a. Someone other than the seller might really own the land.
b. There could be a condition on the deed that makes it illegal for you to have a home there.
c. A previous owner may have defaulted on his/her property taxes-meaning the government really owns the land.
d. All of the above.
19. Suppose that property taxes in your area are paid in advance in January and July. You close on March 15. What options do you have for handling the taxes at your closing?
a. Prorate the taxes so that you reimburse the seller for taxes paid in January, February and the first 15 days of March.
b. Stipulate in your purchase agreement that you will not reimburse him/her for taxes at closing; the seller paid taxes in January and you will pay them in July.
c. There are no options; the seller makes the January payment since he/she was living in the home at the time, and you make the July payment since you will be living in the home when it is due.
d. a and b; either option is acceptable depending on what you agree with the seller.
20. Why is the HUD statement such an important part of your closing?
a. It is an itemized list of all of the costs associated with the closing.
b. It lists all of the documents you will be signing at the closing.
c. It is a summary of your legal rights regarding your mortgage.
d. None of the above.
Answers
1. c
2. b
3. a
4. c
5. d
6. c
7. d
8. d
9. d
10. d
11. a
12. c
13. c
14. b
15. b
16. a
17. d
18. d
19. d
20. a