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About This Quiz
Even if now's the right time in your life to own a home doesn't necessarily mean your finances are also up to the commitment. Test your fiscal fitness in our "Are You Ready to Buy a New Home" quiz and save yourself the hassle of a financial crisis.
What is the recommended percentage of income you should spend on a monthly mortgage payment?
40 to 45 percent
20 to 35 percent
While 15 to 25 percent might be in the ideal range, 20 to 35 percent is a general recommendation.
How much of a down payment is recommended and/or required when purchasing a home?
Although it isn't a national requirement in the United States yet, in 2011 the government proposed a 20 percent minimum down payment for future home buyers, which is in line with what most people recommend and most lenders request.
Which type of loan fluctuates with the rise and fall of interest rates?
Variable loans fluctuate with the federal interest rate, and though they can provide initial savings at the front-end or if you're planning to turn over a property in the short term, variable loans are risky because they can increase over time with little recourse but to pay the higher rate.
Home values can change, so reading up on the pros and cons, legitimacy and potential fraud, of rent-to-owns homes is important and might tip your decision in one direction or another. Buyer, renter and seller beware may be a good rule of thumb. Agreeing to terms often years before finalizing a sale is fairly uncertain forecasting.
In the economic climate of the 21st century , is it still a good idea to pay for a house with cash up front?
Defining a "good idea" in a challenged housing market depends a lot on what the buyer hopes to achieve. If hoping to secure a long-term home without having to make mortgage payments, paying cash up front for a modest property at a low price can be a good idea. Putting a lot of cash into a property you hope to turn over at a profit in a short term may be a good idea depending on the location but potentially it's throwing away money if the value of the house keeps dropping. And in either case, the money might be better invested in a more certain cash maker.
If a homeowner falls behind and needs to default on a mortgage, which step will prevent poor credit reporting?
a short sale
a deed in lieu of foreclosure
Often a short sale is considered a "save" from a foreclosure and a deed in lieu is thought to be a way to hand over the keys to a property. Both steps, however, come with negative impact to a credit report, though most times less of a hit than a foreclosure.
Are brand new houses less of a risk than older ones?
fewer expenses and troubles with the new
less risky investment with the old
Buying a home is a risk either way, and while newer homes come with everything new, they may be poorly constructed, for example. Older homes can cost less and bring buying incentives if within a renaissance zone, but without upgrades, they can cost more to heat and maintain, among other considerations.
Buyers who go into a home purchase with less than 20 percent for a down payment will have to pay for Private Mortgage Insurance, which protects the lender in case of a default on the part of the buyer.
Having children can add how much in expenses each month?
not enough to notice
According to the U.S. Department of Agriculture, Americans spend about $222,360 to raise a child more than 18 years, which breaks down to a monthly average of around $1,029, but it can be as high as "bucket loads" and either way is noticeable.
Which resource should you turn to if you get in over your head after buying a new home?
nonprofit credit counseling agencies
Credit counselors are available throughout the United States, and they offer options for working out mortgage and hardship issues. Real estate agents can't really help with financial matters after a sale, and loan flippers are predatory lenders, offering so-called refinancing that comes to nothing but more charges.
when there are more homes on the market than there are buyers
If a neighborhood or region has more homes for sale than buyers, home prices can drop as sellers compete to sell their homes. It's a form of supply and demand where a buyer has the advantage. If there were 10 homes and 30 buyers, it would be a seller's market.
when there are more buyers than there are homes on the market
it's just a financial expression for a way of thinking about home buying
What do Fannie and Freddie have to do with home buying?
A lot. They provide loans outside of bank loans.
Maybe nothing in the next few years or so.
It's estimated that $5 trillion, of the $11 trillion in mortgages, in the United States come through the government's Fannie Mae and Freddie Mac lending programs. Phasing out these sources and returning loans solely to banks and lenders is a hot topic among legislators and financial experts in 2011.
What kind of credit score do lenders look for from potential home buyers?
640 to 760
620 to 700
580 to 620
all of the above
As the housing market adjusts to lots of losses and high foreclosure rates, lenders have started raising expectations for home buyers. Government and FHA loans might look for a 580 or better and banks could require 760 or better; there is a range of expectations. And getting approved with a low score is possible, but buyers will pay in high interest charges.