Take the Home Buyer's Quiz and learn about terms and concepts you will encounter as you search for the mortgage that is right for you.

Question One:

According to most mortgage lenders, you can qualify for a mortgage amount of about four times your gross annual salary. TRUE or FALSE?

This is false. Most lenders agree that you can afford a home that is 2 to 2 1/2 times your gross salary.

Question Two:

What is the maximum mortgage amount homeowners may deduct from their federal income tax for mortgage interest paid for first and second homes, and any improvements made to those homes?

The answer is 1 million dollars. (By the way, if you are currently in this situation, please give us a call for some special Jumbo rates. We'd love to hear from you!)

Question Three:

A 15-year fixed-rate mortgage saves you nearly 60 percent of the total interest costs over the life of a loan when compared to a 30-year mortgage. TRUE or FALSE?

True. You may also shorten the life of a 30-year loan (and thus save interest costs) by making additional principal payments on your loan along with your normal payments. These are known as curtailments.

Question Four:

Mortgage lenders refer to a homeowner's monthly payment as "PITI" because:

Question Five:

A "jumbo" loan is:

The answer is c: A jumbo loan is any mortgage larger than the limit set by FNMA and FHLMC, commonly know as "Fannie Mae" and "Freddie Mac", respectively. This amount changes nearly every year due to inflation and current economic trends.

Question Six:

A "buy-down" refers to:

The answer is b: A "buy-down" is a temporary reduction in the rate of a mortgage, usually for the first two or three years. One common example is a 3/2/1 buy down On a 9% fixed-rate loan this would make the first year's interest 6%, the second 7%, the third 8% and the fourth through the last 9%. However, you would qualify at the 6% rate. This is a very attractive option for buyers with some extra cash who would like to qualify for a more expensive home.

Question Seven:

Typical closing costs can range from:

The answer is b: You can count on your closing costs being anywhere from 9 to 13 percent of the total loan amount. Where you fall in this range depends on the type of loan (FHA, VA or Conventional), whether or not you've financed some of the closing costs (like first-year insurance), etc. A good rule of thumb is to stick with 10% as an estimate and you'll be safe. Many lenders allow the seller to pay some or all of the buyers closing cost. This is a way to lower that 10% figure.

Question Eight:

Making and extra mortgage payment each year shortens the life of a 30-year loan by:

The answer is a: Amazing, but true.

Question Nine:

A "convertible" mortgage is one which:

The answer is b and d: The "convertible" means that you can convert an ARM into a fixed-rate mortgage (usually during certain periods) for a nominal fee, without refinancing the loan or changing the terms. This is especially attractive if the new fixed rate is lower than your previous ARM rates (i.e. interest rates are falling).

Question Ten:

Lenders normally recommend refinancing a mortgage if:

The answer is a: It is does not usually pay to refinance your home if the spread between your current rate and the rates you can get on a new loan are less than one percent apart.

Question Eleven:

Mortgages backed by the Federal Housing Administration (FHA) require what size down payment?

The answer is a: FHA loans are often very popular because of the low down payment they require.

Question Twelve:

When discussing "points", your lender means:

The answer is b: By paying points up front (at the time of closing), you may lower your overall interest rate. For example, on a $100,000 loan, you may have an interest rate of 10%. By paying one point ($1,000) extra at closing, you may be able to lower your interest rate to 9.75%. Make sure your lender explains the points and interest rates available to you for the loan you choose.

Question Thirteen:

What is a deed of trust?

The answer is c: Every state has their own rules, regulations and terms concerning the borrowing of money for a house.

Question Fourteen:

A VA loan is:

The answer is a and c: VA loans are popular because they offer a very low- or no-down payment, but are restricted to a certain group of people who qualify. Contact your lender to ,see if you are a qualified candidate for a VA loan.