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Quiz: Are You Prepared to Buy a Home?

You’re ready to settle down. Your finances are stable. You’re looking forward to the new responsibility. So, if you’re thinking about taking the plunge into home ownership, take this quiz to see if you’re ready for the long haul.

1. You should get _____________ for your mortgage before you start looking at houses.

A. locked-in
B. a deed of trust
C. pre-approved
D. mortgage insurance

2. In real estate, what does MLS stand for?

A. a Multiple-Layer Single family home
B. Multiple Listing Service
C. My Life Stinks—I can’t find exactly what I want
D. Mortgage Lien Security

3. What are ‘comps’?

A. Computerized Real Estate websites
B. Compound home structures
C. Comparable properties
D. ADA Compliant homes

4. A “jumbo” loan is:

A. A mortgage loan that’s over a $300,000 threshold
B. A type of financing that exceeds the limits set by Fannie Mae or Freddie Mac
C. A mortgage for a home with four bedrooms or more
D. A mortgage for an egg-shaped domain

5. TRUE or FALSE: If you’re buying a new home or one that’s just a few years old, you can skip getting a home inspection.

A. True
B. False

6. When discussing “points,” your lender means:

A. Each point equals 1 percent of the loan amount.
B. The things you really like about your new house
C. A rating system used by real estate agents.
D. Paying down a mortgage with a point-of-sale solution.

7. Mortgage lenders refer to a homeowner’s monthly payment as “PITI” because:

A. “Piti” is the French word for “mortgage reimbursement”
B. PITI is short for “Pay It on Time In full”
C. PITI refers to a type of bread most real estate agents snack on
D. It includes Principal, Interest, Taxes and Insurance

8. TRUE or FALSE: Most all lenders require a title search and clearance before home closing.

A. True
B. False

9. How much will you typically pay in closing costs?

A. Less than 2% of the purchase price
B. Between 2% and 5%
C. Between 5% and 10%
D. More than 10%

10. I’m interested in buying a home. Whom should I talk to first?

A. A real estate agent
B. A seller
C. A mortgage lender
D. An appraiser

Answers:

1.  C. Get pre-approved. With a mortgage pre-approval letter from Tower, you can save time when house hunting and know exactly how much loan you’re approved for! Your pre-approval letter to the seller shows that you are a serious buyer.
2.  B. Find your next home by searching current Multiple Listing Service listings made available through Tower’s Home Advantage® program Then save your favorite searches and get email alerts when new properties come up.
3.  C. Comparables, or “comps,” are the recent sales prices of homes similar to the one you’re buying.
4.  B. A jumbo is a mortgage that is larger than the limits set by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) [commonly known as “Fannie Mae” and “Freddie Mac,” respectively]. This amount changes nearly every year due to inflation and current economic trends.
5.  B. False. Every house should be inspected. Many home insurance companies will not insure a home if it has not undergone a certified inspection. The seller may not be aware of problems, so if the inspector does find anything wrong, use it as a bargaining chip. Ask the seller to correct the defects or ask for money to make the repairs yourself.
6.  A. You can reduce your interest rate from your lender when you “pay for points” to lower your monthly payment. One point costs 1 percent of your loan amount and will reduce your interest rate. For example, if the amount you borrow is $200,000, one point is $2,000. Points are assessed at closing and are also referred to as loan origination fees or discount points.
7.  D. PITI is an acronym lenders use to describe the different components that make up your monthly mortgage payment—principal, interest, taxes and insurance.
8.  A. True. Your lender wants to make sure no one else can make a claim on the property. As the buyer, it’s your choice to select the title company that will handle your real estate title and settlement services at the final closing. Your title company will represent you and protect your interests.
9.  B. Between 2% and 5%. Closing costs cover mortgage origination, underwriting and processing fees, title search and insurance, attorney fees, inspection fees, appraisals and mortgage recording costs. They usually run between 2% and 5% of the purchase price. Some buyers also pay upfront “points” to lower their monthly mortgage costs, which could push closing costs beyond 5%.
10.  C. Typically, it is most helpful to work with a lender to get pre-approved for a mortgage loan first, and then work with a real estate agent to help you shop for a home within your price range.

Resources: Scripps Networks, LLC, Kiplinger, Realtor.com