Home Buying Quiz: How much do you know?

HomeBuyingQuizHeader

From money.cnn.com, August 2014

From mortgages to closing costs, here are five questions to test your knowledge of these homebuying essentials. Answers appear at the bottom of this quiz.

Question 1: How will a bad credit score effect your ability to buy a home?

A. I may not qualify for a mortgage

B. I may need a bigger down payment

C. I’ll have to pay a higher mortgage rate

D. All of the above

 

Question 2: What’s the most surefire way to get the financing you need?

A. Get pre-qualified for a mortgage

B. Get pre-approved for a mortgage

C. Have the mortgage pre-underwritten

D. Play the Powerball!

 

Question 3How 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%

 

Question 4: How much savings should you have after you buy a home?

A. Who needs savings? I’m a person of property now!

B. One to three months’ worth of living expenses

C. Three to six months’ worth of living expenses

D. At least six months’ worth of savings!

 

Question 5: As a general rule of thumb, your monthly mortgage payment should not exceed what percentage of your monthly income?

A. 20%

B. 28%

C. 36%

D. 43%

ANSWERS

Question 1 = D, All of the above

A credit score below 600 does not completely eliminate the possibility of getting a mortgage but it does make it harder — and more expensive. At the very least, it will require you to pay a higher interest rate or points upfront.

Question 2 = C, Have the mortgage pre-underwritten

A pre-underwritten loan is the best way to ensure that your loan will go through. It entails a thorough vetting of your financial information and a full approval of the loan. If the final amount is within the original price range, the deal goes through.

Pre-approval is the next best option. This is when a lender gives a firm commitment on the amount they will lend. If the borrower’s paperwork checks out, they will often get the loan. Pre-qualifying, on the other hand, is merely an estimate of how much you can borrow based on your income and assets.

Question 3 = 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 the 5% mark.

Question 4 = D, At least 6 months worth of savings

Most experts recommend that you walk out of the closing with six to 12 months of savings. The first months of homeownership are often the hardest. Not only are you likely paying more on housing costs but you’re probably spending freely to furnish or update the new place.

Question 5 = B, 28%

It was long believed that mortgage costs shouldn’t exceed 28% of a borrower’s gross income in order to comfortably afford payments. Total debt to income, which also includes any student loans, credit card balances and auto loans, should stay below 36%.

 

CONCLUSION

How many did you get right?  3 out of 5?  More?  Less?

Regardless of your score, if you are considering selling or buying a home, you need someone who knows all the right answers – AND all of the right questions to ask.  Please let me guide you through all the technical details of the home purchasing process.  I am your real estate resource.  Call me today!

The Rodocker Group
Phillip Rodocker

206-914-7252 Mobile
philr@johnlscott.com

About Phillip Rodocker