Credit Smart HomebuyerU Practice Test

These questions are part of the practice quiz. Start practicing

• Under which arrangement might the buyer pay the agent's commission?
• To prepare for and respond to emergencies and disasters, you can do the following:
• Which items belong in a post-purchase budget for homeowners?
• You should never sign a loan document that has blank lines.
• LTV stands for loan-to-value and represents the loan amount as a percentage of the property's value.
• All perils are included in homeowner's insurance policies.
• What is Private Mortgage Insurance (PMI) and when is it required on conventional loans?
• What is a co-signer in mortgage lending?
• What is the difference between a rate lock and a rate float-down?
• The back-end debt-to-income ratio is calculated by dividing total monthly obligations by gross monthly income. Which of the following is included in total monthly obligations?
• Making pre-payments can help you pay off your loan sooner.
• Which statement best describes escrow in mortgage payments?
• If a lender denies your loan, they're required by law to provide the applicant with an explanation and share the credit score they used to make the lending decision.
• When is PMI typically required on a conventional loan?
• NOT listed as an acceptable source of capital?
• What is a soft inquiry and when does it occur?
• For verifying self-employment income, which documentation is commonly requested?
• Not applicable to the final walk-through, the buyer should verify property condition before closing.
• Which item is included in an emergency kit?
• Which factor can allow conventional programs to exceed the 28% front-end DTI ceiling?
• In the context of PMI, what happens when equity reaches 20%?
• Which option would be considered a refinancing method to avoid foreclosure?
• In a real estate transaction, including inspection results as a contingency can allow the buyer to walk away without penalty.
• The funds required to cover the down payment and closing costs are referred to as:
• The statement 'A home inspection is ordered and paid for by the seller' is true or false?
• What is the role of a real estate attorney in some states, and is it required for mortgage closings?
• What is the difference between a home warranty and homeowners insurance?
• What is the typical purpose of an escrow account in mortgage lending?
• There may be special loan products and affordable homeownership programs available locally; who should you contact to learn about options?
• Which statement describes compensating factors as they relate to DTI allowances?
• Which arrangement allows a new qualified borrower to take over the existing mortgage and payments?
• Which statement about earnest money is true?
• Real estate licensing typically requires which of the following?
• Which statement best describes prepayment penalties in conventional loans?
• What is a Loan Estimate and why is it important?
• How does a mortgage's APR differ from its interest rate?
• What is front-end DTI acceptable range for conventional loans?
• What term describes a situation where another qualified buyer takes over your mortgage debt and the payments?
• If a homebuyer has a friendly agent who markets well, is further homework unnecessary to choose a good agent?
• Having adequate cash reserves demonstrates to your lender that you have responsibly managed your money and have savings and other assets to fall back on in case of emergency.
• Name three common ways to improve your credit score before applying for a mortgage.
• If you have an emergency fund to cover 3 - 6 months of expenses in case of loss of income, you've saved enough money for home maintenance and repairs.
• Can buyers request that certain items stay with the home as part of the sale?
• Which resource is recommended for foreclosure prevention counseling?
• The lender will order an appraisal which substitutes for a home inspection.
• Private mortgage insurance (PMI) protects the borrower if they can't make their mortgage payment.
• If you can't keep your home any longer, there are other options to avoiding foreclosure. What might these options include?
• What option might the loan servicer use to pause foreclosure and give you time to sell?
• Which of the following is NOT listed as an alternative to foreclosure?
• How does underwriting treat assets and reserves?
• When purchasing a home, you may owe the seller a prorated amount for property or school taxes the seller prepaid.
• Which action should you take if you have trouble paying your mortgage?
• Which statement best describes FHA financing compared with conventional financing?
• The mortgage is not secured by the home.
• What term describes selling your home for less than the mortgage balance with the lender writing off the remaining debt?
• Which statement about the down payment is true?
• Using your credit card wisely means:
• What is loan-to-value (LTV) ratio and why does it matter for approval?
• Which of the following is NOT one of the four C's of lending?
• Which scam charges the homeowner rent to stay in the home with a promise that they can purchase it back when their finances improve?
• Which statement best describes the scope of the Fair Housing Law?
• Which of the following is a landscaping-related home safety practice?
• Which statement about property taxes and homeowners insurance is correct?
• The buyer will have plenty of time at closing to read all documents in their entirety.
• What is a prepayment penalty, and do conventional loans typically include them?
• The home inspection is ordered through the lender and determines the market value of the home.
• Which option involves refinancing to replace the existing loan with a new one to avoid foreclosure?
• What should you expect during the home appraisal process?
• Which document is used by lenders to present the final terms and closing costs to borrowers?
• Is the MLS publicly available and commonly used by homebuyers?
• Tax prorations at closing may require the buyer to reimburse the seller for taxes the seller prepaid.
• Is it acceptable to borrow money from a family member for your down payment if you intend to repay them?
• Which statement about APR is true?
• Which loan program is most likely to require no down payment for eligible veterans?
• The final walk-through gives the buyer a final chance to make sure everything is in order at the property and resolve any outstanding issues.
• A Home Equity Line of Credit (HELOC) is best described as:
• Which factor relates to the borrower's ability to repay the loan?
• Which tool is recommended to access canned goods in an emergency kit?
• Capital, or cash to close, refers to the funds you need to save in order to cover the cost of down payment and closing costs.
• What is the difference between pre-qualification and pre-approval in mortgage lending?
• Which statement about closing costs is true?
• Which component of the monthly mortgage payment can change due to changes in property tax or insurance?
• Which statement about escrow and monthly payments is accurate?
• Which term describes the scam where someone offers cash for your home title but leaves you with the mortgage?
• Which factor is not included in APR calculation?
• What is a hard inquiry and how can it affect your credit score?
• What is the effect of a high credit utilization on your score and on financing?
• Which loan type is guaranteed by the federal government?
• Which action should you take first when disaster strikes?
• What are the four C's of lending?
• What are contingencies in a real estate deal?
• Not all homeowner's insurance policies cover every peril.
• The statement 'The MLS is publicly available and widely used by homebuyers' is true.
• Back-end debt-to-income (DTI) ratio is calculated by which method?
• Which mortgage type describes a loan where the interest rate and monthly principal and interest payments stay the same for the life of the loan, while total monthly payments can change with property tax, insurance, or other escrow items?
• What is homeowners insurance and what does it typically cover?
• What is the purpose of the credit report in mortgage underwriting?
• Why is a home inspection recommended even if the appraisal passes?
• Which statement about the processing step in the mortgage process is true?
• The lender will order an appraisal which substitutes for a home inspection.
• When evaluating a homeowners association (HOA), which factors should you consider?
• Which item is commonly included in an emergency kit?
• What is the purpose of the Closing Disclosure form in the mortgage process?
• Which statement best distinguishes earned income from self-employment income in mortgage underwriting?
• Who is typically responsible for paying the majority of the real estate agent's commission at closing?
• What percentage makes up the FICO score for Amounts owed?
• Which statement about negative amortization is true?
• Which type of food is recommended in an emergency kit?
• How does a higher credit score impact mortgage interest rates?
• The following statement is true: If the home inspector finds an issue with the property, the buyer has the right to walk away without financial penalty if inspection results are included as a contingency in the purchase offer.
• Lenders consider investments to be which of the following?
• What is a Closing Disclosure (CD) and when must you receive it?
• Which of the following is a typical credit-related reason to address before applying for a mortgage?
• What down payment percentage is generally required on conventional conforming loans to avoid private mortgage insurance (PMI)?
• Which items are commonly conveyed with the home?
• Which statement about online scams and cybersecurity habits is correct?
• Which statement best describes fixed-rate versus adjustable-rate mortgages?
• When making an offer, should you always offer less than the asking price?
• Tenancy in Common is a type of ownership structure where two or more people own the property, all with equal ownership, and the share of each owner passes to the other upon the other's death.
• Which scam involves someone offering to loan you money for home repairs while you wait for your insurance money?
• Which item is NOT listed as a component of an emergency kit?
• Which statement about back-end DTI is true?
• Making extra payments on a loan typically has what effect on the total interest paid?
• What is an escrow account in the mortgage context?
• What is the purpose of a title search?
• In the mortgage loan process, which step typically occurs after loan underwriting?
• Which statement about government insured loans is true?
• Who should you contact for mortgage relief options during a disaster?
• Which statement best describes home equity?
• Which item is typically included in closing costs?
• Which option is explicitly listed as a potential step if you can't qualify for a loan on your own?
• Which option best describes what happens after underwriting?
• Which option includes exactly the four terms Capacity, Capital, Credit, and Collateral?
• Earnest money reflects the buyer's seriousness and is held in escrow; it applies toward closing costs and is refundable only under specified contingencies.
• Lenders determine adequacy of savings by averaging the last six months of your checking and savings balances.
• Government insured loans, such as FHA loans, are the only option for low down payment mortgages.
• Which statement about hard inquiries is true?
• What happens to the monthly principal and interest on a fixed-rate mortgage over the life of the loan?
• Which option is NOT one of the four C's of lending?
• Real estate agents can assist with which of the following in a home sale?
• What is MIP in FHA loans and how long can it last?
• Manufactured homes are the same as mobile homes and don't need to meet federal construction and safety standards.
• Why is credit utilization important for score calculation?
• Which factors should you compare when evaluating loan offers besides the rate?
• Routine maintenance refers to tasks that keep things running smoothly and efficiently in a home.
• What is typically true about earnest money?
• What is the process for correcting errors on a credit report?
• Which statement best describes mortgage insurance and when it is typically required?
• Name the four major loan types commonly used for home purchases in the United States.
• Which item is commonly considered derogatory on a credit report?
• If a home appraisal determines market value lower than the loan amount, what is a likely consequence?
• What is the correct order of steps in the mortgage loan process?
• Which is an example of a government-backed loan?
• The mortgage secures the loan with the home, essentially listing the home as collateral.
• Which option might a loan servicer use to pause foreclosure and give you time to sell?
• What steps are typically involved in the post-purchase financial plan for new homeowners?
• Which statement defines the numerator used in the front-end debt-to-income (DTI) calculation?
• A fixed-rate mortgage has an interest rate that stays the same for the life of the loan.
• What is an amortization schedule?
• When is the real estate agent's commission typically paid?
• Which statement about escrow accounts is true?
• Which 4 C describes the borrower's ability to repay based on income and obligations?
• Which scam involves a contractor asking for money up front and leaving after completing little or no repair work?
• What is the term for transferring the title of the home back to the lender in exchange for cancellation of the mortgage debt?
• Which statement about escrow and property taxes is correct?
• Which statement about HELOC usage is true?
• With a rate float-down option, what can happen if market rates drop before closing?
• What is the typical range for closing costs as a percentage of the home price?
• Which statement about the relationship between down payment and PMI is true?
• What distinguishes FHA loan from conventional financing?
• What is a potential consequence of a low appraisal on a home purchase?
• In credit report disputes, what is a typical timeframe to correct inaccuracies?
• When searching for a contractor, you should obtain multiple bids and avoid paying the full amount before the work starts.
• What best describes a reserve in mortgage lending?
• True or False? Contingencies are items within a property that the homebuyer would like to have included in the purchase.
• What is a back-end DTI limit commonly used by conventional lenders?
• Why do lenders verify liquid assets for reserves?
• Which term fits the description: Do you have a history of paying your bills/debts on time?
• Where is earnest money typically held?
• On conventional loans, a 20% down payment eliminates PMI.
• Lenders generally don't have any guidelines or restrictions on the home you purchase or its condition, provided you have good credit.
• Which statement about neighborhood importance is true?
• Which program is most associated with no down payment for eligible veterans?
• What is the importance of escrow for property taxes and insurance?
• What term describes cash needed to close on a property, including the down payment, closing costs, and any reserves?
• Which factor could lead to an increase in the back-end DTI ratio?
• If the appraisal is low, which option might a buyer pursue?
• If you owe $180,000 on a home valued at $200,000, what is the loan-to-value (LTV)?
• Making extra payments toward the loan principal can lead to which of the following outcomes?
• If you get a fixed-rate mortgage, your monthly payment to the lender won't change for the life of the loan.
• Which of the following are acceptable sources of capital for a mortgage down payment?
• Homebuyers who don't have a 20% down payment saved might have the following options.
• What is a rate-lock period for mortgage rates?
• Which items may be included as derogatory information on a credit report?