Trey Bowden
The Edmond Sun
EDMOND
August 16, 2008 12:02 am
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Queue lights. Turn up music. Signal the audience to applaud. It’s time to play, “Let’s Make a Home Deal”! Each month hundreds of buyers sign purchase contracts and mortgage agreements for new homes. If you’re among this group you owe it to yourself to take this brief quiz. Some of the answers may surprise you.
1. Which is more important for the buyer to have?
Prequalification
Preapproval
2. If you want to buy a FSBO (a home for sale by owner) you cannot use a buyer’s real estate agent?
True
False
3. Closing costs are an unavoidable part of every purchase transaction. What percentage of the loan amount should you expect to pay in closing costs?
1 percent
3 percent to 6 percent
8 percent to 10 percent
4. Mortgage transactions are required to have title insurance because it is coverage that protects you as the borrower.
True
False
5. You’re purchasing a home and want to take money from your Roth IRA for the down payment. If you do, you will have to pay this money back before you retire.
True
False
6. Even in the midst of our present-day mortgage crisis, an Adjustable Rate Mortgage still can be a good idea for some borrowers.
True
False
7. It’s always a good idea to get a home inspection as a part of any purchase transaction; regardless of whether the home is new or used. What is the typical cost of a home inspection?
$95
$175
$300 to $600
$750 or more
8. Private Mortgage Insurance is for buyers:
a. With less than a 20 percent down payment
b. With more than a 20 percent down payment
c. With certain credit scores
d. With lower income
9. Your Realtor shows you a house and you like it. He/she tells you that two other homes have sold in that neighborhood for $175,000 and $200,000. Based on this information, what should you offer for the home?
a. $175,000a
b. $187,500
c. $195,000
d. Wait, I need more infor
mation
Answers
1. Preapproval: A preapproval outranks a prequalification, which simply is the lender’s best guess estimation that you will qualify to get the loan you need. A preapproval requires the lender to issue a letter to your Realtor.
2. False: A FSBO home has no selling Realtor, but this does not prevent you from hiring a buyers Realtor. In some cases the FSBO home owner will even pay the typical 3 percent fee to your Realtor.
3. Three percent to 6 percent: These costs can vary depending on the lender you choose as well as if you are paying any discount points to buy down your interest rate.
4. False: While title insurance is required on all property transactions, the coverage protects the lender, not the buyer.
5. False: Before you take my word for it (I’m not a financial adviser, I’m just giving you the benefit of my research) check with your financial adviser or tax accountant.
6. True: If you’re certain that you’ll be moving before the rate changes on your adjustable rate mortgage, it can be a viable way to save money. Before agreeing to this type of mortgage, make certain you understand when and how much the rate will change.
7. C: This price depends on the inspector. Just because your Realtor recommends one inspector, it could benefit you to get another price or two.
8. A: Private mortgage insurance protect lenders against buyers defaulting on their loan repayments and is required for any mortgage with financing over 80 percent of the homes value.
9. D: If that’s all the information you have, you don’t know enough to make a savvy offer. You need to know square footage as well as how long the other properties were on the market. Make sure you do all your homework before making an offer.
TREY BOWDEN
is a licensed mortgage professional in Edmond. To read more go to:
http://homeownergonemad.blogspot.com.
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