FREDDIE MAC - CREDIT SMART QUESTIONS AND
ANSWERS
The percentage of your gross monthly income that goes toward paying for your housing
expenses is called the "housing expense ratio" and is based on the total housing
payment, which includes: - Answers -Principal, interest, property taxes, homeowner's
insurance, mortgage insurance, homeowner's or condo association fees
Lenders don't include your future housing payment in your debt-to-income ratio, only all
other outstanding debts. - Answers -False
The principal amount is the total amount borrowed. - Answers -True
Do lenders use gross income or net profits when calculating mortgage affordability for
self-employed borrowers? - Answers -Net profits
An escrow account is a special account managed by the borrower that holds funds for
property taxes and property insurance payments. - Answers -False
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. - Answers -True
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. - Answers -True
Acceptable sources of capital include: - Answers -Funds from a family member, funds
from a down payment assistance program or funds from your savings account
Lenders consider investments to be (select all that apply): - Answers -Lenders consider
investments to be IRAs, bonds, CDs, stocks and 401(k) plans.
To determine if you have adequate savings to obtain a mortgage and sustain
homeownership, lenders will average the last six months of your checking and savings
account balances. - Answers -False
Lenders consider four primary factors when determining whether to approve a loan - the
4 C's of lending. What are they? - Answers -Credit, Capacity, Capital and Collateral
Derogatory information on your credit report may include: collections, judgements,
bankruptcies and/or late payments. - Answers -True
Lenders generally don't have any guidelines or restrictions when it comes to the home
you want to purchase or its condition, provided you have good credit. - Answers -False
, The home inspection is ordered through the lender and determines the market value of
the home. - Answers -False
Manufactured homes are the same as mobile homes and don't need to meet federal
construction and safety standards. - Answers -False
If you make extra payments on your loan, that can help pay down the principal faster
and thus greatly reduce the interest due on the loan. - Answers -True
Government insured loans, such as FHA loans, are the only low down payment
mortgages available to homebuyers. - Answers -False
A fixed-rate mortgage is a loan where the interest rate stays the same for the life of the
loan. - Answers -True
Which of the following loans are guaranteed by the federal government (select all that
apply): - Answers -VA, USDA, FHA
There may be special loan products and first-time homebuyer or affordable
homeownership programs available in your community and it's worth calling your local
lenders, credit unions and housing counseling agencies to find out about your options. -
Answers -True
What percentage of the purchase price is required as a down payment for conventional
conforming loans to avoid paying private mortgage insurance? - Answers -20%
Private mortgage insurance protects the borrower if they can't make their mortgage
payment. - Answers -False
It's okay to borrow money from a family member for your down payment, as long as you
pay the family member back. - Answers -False
You will need to repay the seller any property or school taxes that they have already
paid on the property. - Answers -True
LTV stands for loan-to-value and indicates the amount of the loan you owe as a
percentage of the value of the property. - Answers -True
The Annual Percentage Rate (APR) is the same as the interest rate. - Answers -False
The mortgage loan process occurs in the following order: - Answers -Pre-qualification
or pre-approval, loan application, loan processing, loan underwriting, loan approval or
denial.
ANSWERS
The percentage of your gross monthly income that goes toward paying for your housing
expenses is called the "housing expense ratio" and is based on the total housing
payment, which includes: - Answers -Principal, interest, property taxes, homeowner's
insurance, mortgage insurance, homeowner's or condo association fees
Lenders don't include your future housing payment in your debt-to-income ratio, only all
other outstanding debts. - Answers -False
The principal amount is the total amount borrowed. - Answers -True
Do lenders use gross income or net profits when calculating mortgage affordability for
self-employed borrowers? - Answers -Net profits
An escrow account is a special account managed by the borrower that holds funds for
property taxes and property insurance payments. - Answers -False
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. - Answers -True
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. - Answers -True
Acceptable sources of capital include: - Answers -Funds from a family member, funds
from a down payment assistance program or funds from your savings account
Lenders consider investments to be (select all that apply): - Answers -Lenders consider
investments to be IRAs, bonds, CDs, stocks and 401(k) plans.
To determine if you have adequate savings to obtain a mortgage and sustain
homeownership, lenders will average the last six months of your checking and savings
account balances. - Answers -False
Lenders consider four primary factors when determining whether to approve a loan - the
4 C's of lending. What are they? - Answers -Credit, Capacity, Capital and Collateral
Derogatory information on your credit report may include: collections, judgements,
bankruptcies and/or late payments. - Answers -True
Lenders generally don't have any guidelines or restrictions when it comes to the home
you want to purchase or its condition, provided you have good credit. - Answers -False
, The home inspection is ordered through the lender and determines the market value of
the home. - Answers -False
Manufactured homes are the same as mobile homes and don't need to meet federal
construction and safety standards. - Answers -False
If you make extra payments on your loan, that can help pay down the principal faster
and thus greatly reduce the interest due on the loan. - Answers -True
Government insured loans, such as FHA loans, are the only low down payment
mortgages available to homebuyers. - Answers -False
A fixed-rate mortgage is a loan where the interest rate stays the same for the life of the
loan. - Answers -True
Which of the following loans are guaranteed by the federal government (select all that
apply): - Answers -VA, USDA, FHA
There may be special loan products and first-time homebuyer or affordable
homeownership programs available in your community and it's worth calling your local
lenders, credit unions and housing counseling agencies to find out about your options. -
Answers -True
What percentage of the purchase price is required as a down payment for conventional
conforming loans to avoid paying private mortgage insurance? - Answers -20%
Private mortgage insurance protects the borrower if they can't make their mortgage
payment. - Answers -False
It's okay to borrow money from a family member for your down payment, as long as you
pay the family member back. - Answers -False
You will need to repay the seller any property or school taxes that they have already
paid on the property. - Answers -True
LTV stands for loan-to-value and indicates the amount of the loan you owe as a
percentage of the value of the property. - Answers -True
The Annual Percentage Rate (APR) is the same as the interest rate. - Answers -False
The mortgage loan process occurs in the following order: - Answers -Pre-qualification
or pre-approval, loan application, loan processing, loan underwriting, loan approval or
denial.
