Quiz How Smart a Home BUYER Are You? By Pat Mertz Esswein, Associate Editor | Kiplinger's Personal Finance April 2018 iStockphoto The more you know about the home-buying process, the more money, time and hassle you'll save -- no matter what the current real estate market is doing. Here are 10 questions to see how prepared you are to buy a house. Take our quiz: Start Quiz Quiz | How Smart a Home BUYER Are You? Question 1 of 10 Which matters more: being prequalified for a mortgage or preapproved? A. Prequalified B. Preapproved Quiz | How Smart a Home BUYER Are You? Question 1 of 10 Which matters more: being prequalified for a mortgage or preapproved? A. PrequalifiedB. Preapproved Make sure you’re preapproved before you shop for a home. Prequalification is just an estimate of what the lender thinks you can afford. Preapproval requires that you submit a loan application with the necessary documentation and fee. The preapproval letter assures you and prospective sellers and t... Read more ˅ Make sure you’re preapproved before you shop for a home. Prequalification is just an estimate of what the lender thinks you can afford. Preapproval requires that you submit a loan application with the necessary documentation and fee. The preapproval letter assures you and prospective sellers and their agents that you can obtain a mortgage. Without it, they may not consider your offer. Less ˄ Next Question Quiz | How Smart a Home BUYER Are You? Question 2 of 10 When buying a home "For Sale By Owner," you can't use a buyer's agent. A. True B. False Quiz | How Smart a Home BUYER Are You? Question 2 of 10 When buying a home "For Sale By Owner," you can't use a buyer's agent. A. TrueB. False Many people sell their homes themselves because they don't want to pay a 5% to 6% commission to real estate agents. But some sellers -- especially in a depressed market -- will accept buyers' agents and their 2.5% to 3% commission. They don't want to pay full commission, but they don't want agents t... Read more ˅ Many people sell their homes themselves because they don't want to pay a 5% to 6% commission to real estate agents. But some sellers -- especially in a depressed market -- will accept buyers' agents and their 2.5% to 3% commission. They don't want to pay full commission, but they don't want agents to boycott their property either. Less ˄ Next Question Quiz | How Smart a Home BUYER Are You? Question 3 of 10 How much should you expect to pay for closing costs? A. 1% of the purchase price B. 3% to 6% of the purchase price C. 10% of the purchase price Quiz | How Smart a Home BUYER Are You? Question 3 of 10 How much should you expect to pay for closing costs? A. 1% of the purchase priceB. 3% to 6% of the purchase price In addition to a down payment, buyers should budget an extra 3% to 6% of the purchase price to cover costs at settlement. These usually include the loan origination fee, any loan discounts or "points," title insurance, government recording charges, transfer taxes, initial deposit for escrow account ... Read more ˅ In addition to a down payment, buyers should budget an extra 3% to 6% of the purchase price to cover costs at settlement. These usually include the loan origination fee, any loan discounts or "points," title insurance, government recording charges, transfer taxes, initial deposit for escrow account (for, say, property taxes and hazard insurance), and services that you or the lender pay for. Less ˄ C. 10% of the purchase price Next Question Quiz | How Smart a Home BUYER Are You? Question 4 of 10 The title insurance you're required to buy in order to get your loan is for your own protection. A. True B. False Quiz | How Smart a Home BUYER Are You? Question 4 of 10 The title insurance you're required to buy in order to get your loan is for your own protection. A. TrueB. False You're required to pay for lender's title insurance at settlement, but it's not for your benefit. It only shields the lender in case a problem with the property's title arises (such as unclear wills, unpaid taxes and easements). Next Question Quiz | How Smart a Home BUYER Are You? Question 5 of 10 If you draw any money from your Roth IRA to buy your first home, you have to pay it back before retirement. A. True B. False Quiz | How Smart a Home BUYER Are You? Question 5 of 10 If you draw any money from your Roth IRA to buy your first home, you have to pay it back before retirement. A. TrueB. False Nothing has to be repaid, ever. All your contributions can come out of a Roth at any time, tax and penalty free. And, after the account has been opened for five years, up to $10,000 of earnings can be withdrawn tax- and penalty-free for the purchase of your first home. Assume $5,000 goes into a Roth... Read more ˅ Nothing has to be repaid, ever. All your contributions can come out of a Roth at any time, tax and penalty free. And, after the account has been opened for five years, up to $10,000 of earnings can be withdrawn tax- and penalty-free for the purchase of your first home. Assume $5,000 goes into a Roth each year for five years, and the account earns an average of 8% a year. At the end of five years, the Roth would hold about $31,680 -- all of which could be withdrawn tax and penalty free for a down payment. Less ˄ Next Question Quiz | How Smart a Home BUYER Are You? Question 6 of 10 Adjustable-rate mortgages can still be a good deal for some people, even when rates are rising. A. True B. False Quiz | How Smart a Home BUYER Are You? Question 6 of 10 Adjustable-rate mortgages can still be a good deal for some people, even when rates are rising. A. True True, but you must manage the risk of a rising interest rate. Start by choosing an ARM with an initial fixed-rate period that matches how long you plan to own the house, say, 5 or 7 years. And, to protect against the possibility that you can’t sell when you want or need to, make sure that you can ... Read more ˅ True, but you must manage the risk of a rising interest rate. Start by choosing an ARM with an initial fixed-rate period that matches how long you plan to own the house, say, 5 or 7 years. And, to protect against the possibility that you can’t sell when you want or need to, make sure that you can afford the monthly payment if the rate rises to the limit of the cap on the first rate adjustment, typically 2 percentage points. Less ˄ B. False Next Question Quiz | How Smart a Home BUYER Are You? Question 7 of 10 About how much will a home inspection typically cost you? A. $75 - $100 B. $300 - $400 C. $800 - $1,000 Quiz | How Smart a Home BUYER Are You? Question 7 of 10 About how much will a home inspection typically cost you? A. $75 - $100B. $300 - $400 Plan on paying between $300 and $400. That fee may vary by region and sometimes on the age, size and construction of the house. When you make an offer on a home, make it contingent on a satisfactory home inspection. In a market where buyers have some advantage over sellers, you can use the inspector... Read more ˅ Plan on paying between $300 and $400. That fee may vary by region and sometimes on the age, size and construction of the house. When you make an offer on a home, make it contingent on a satisfactory home inspection. In a market where buyers have some advantage over sellers, you can use the inspector's report for further price negotiations if the property needs any major repairs. Less ˄ C. $800 - $1,000 Next Question Quiz | How Smart a Home BUYER Are You? Question 8 of 10 Who needs private mortgage insurance? A. Buyers with a down payment less than 20% B. Buyers with a down payment more than 20% C. It's optional for all buyers D. It's mandatory for all buyers Quiz | How Smart a Home BUYER Are You? Question 8 of 10 Who needs private mortgage insurance? A. Buyers with a down payment less than 20% If your down payment on a home is less than 20% of the appraised value, you will have to pay for private mortgage insurance. This protects the lender if you default on your loan. PMI costs about 0.5% to 1.5% of the amount of the loan per year. So, for a $200,000 mortgage, you'd pay about $1,000 annu... Read more ˅ If your down payment on a home is less than 20% of the appraised value, you will have to pay for private mortgage insurance. This protects the lender if you default on your loan. PMI costs about 0.5% to 1.5% of the amount of the loan per year. So, for a $200,000 mortgage, you'd pay about $1,000 annually at the lower rate. Less ˄ B. Buyers with a down payment more than 20%C. It's optional for all buyersD. It's mandatory for all buyers Next Question Quiz | How Smart a Home BUYER Are You? Question 9 of 10 You find a condo you like. Your realtor tells you two other units in the building sold for $200,000 and $225,000. What should you offer? A. $185,000 B. $200,000 C. $212,500 D. Hold on. You need more information. Quiz | How Smart a Home BUYER Are You? Question 9 of 10 You find a condo you like. Your realtor tells you two other units in the building sold for $200,000 and $225,000. What should you offer? A. $185,000B. $200,000C. $212,500D. Hold on. You need more information. That's not enough info to make your decision. You should find out when those sales took place, what the properties were originally listed for and how long they were on the market. Then consider the asking price for the unit you want and make allowances for the current market climate -- is it a buyer... Read more ˅ That's not enough info to make your decision. You should find out when those sales took place, what the properties were originally listed for and how long they were on the market. Then consider the asking price for the unit you want and make allowances for the current market climate -- is it a buyer's market or a seller's? Plus, you'll want to know how the units compare in size, style, amenities and location in the building. Less ˄ Next Question Quiz | How Smart a Home BUYER Are You? Question 10 of 10 As a new homeowner, what costs can you deduct from income when you file your federal taxes? A. Mortgage interest B. Property taxes C. Points paid at settlement D. Private mortgage insurance E. Everything except "D" Quiz | How Smart a Home BUYER Are You? Question 10 of 10 As a new homeowner, what costs can you deduct from income when you file your federal taxes? A. Mortgage interestB. Property taxesC. Points paid at settlementD. Private mortgage insuranceE. Everything except "D" In the past you probably took the standard deduction when you filed your federal income taxes. But once you own a home, itemizing may make sense—and save you a lot on your tax bill. In the year you buy a house, you can not only write off discount points you may have paid when you took your mortgag... Read more ˅ In the past you probably took the standard deduction when you filed your federal income taxes. But once you own a home, itemizing may make sense—and save you a lot on your tax bill. In the year you buy a house, you can not only write off discount points you may have paid when you took your mortgage, but you can deduct points that the seller paid for you! Congress extended the deduction for PMI premiums paid through year-end 2016. It must renew the deduction for future tax years. Less ˄ See Results Quiz | How Smart a Home BUYER Are You? Results Next QuizTrue or False: Test Yourself on Social Security Claiming Strategies See All Quizzes answer_num=2,2,2,2,2,1,2,1,4,5|answer_text="B. Preapproved","B. False","B. 3% to 6% of the purchase price","B. False","B. False","A. True","B. $300 - $400","A. Buyers with a down payment less than 20%","D. Hold on. You need more information.","E. Everything except "D""|total_questions=10|url=/quiz/real-estate/T010-S001-how-smart-a-home-buyer-are-you/index.html|total_pages=22|page_id=10479|evaltext_num=0|kipad_id=BuyingSellingaHomeQuizzes Advertisement Advertisement Sponsored Financial Content