What’s your mortgage IQ?

What’s the difference between a fixed-rate and an adjustable-rate mortgage?

Correct! The answer is A.
With a fixed-rate mortgage, the interest rate never changes. With an adjustable-rate mortgage, the interest rate—and your payment amount—can increase or decrease periodically. For example, a 7/1 adjustable-rate mortgage will have the same interest rate for the first seven years, and then will change annually based on the market. There is a cap on how much your rate can increase in a given period of time. With an adjustable-rate mortgage, the rate is typically lower than a fixed-rate and can be ideal if you plan on being in the property for a shorter period of time.

This is false. The correct answer is A. (Select A to read more about the correct answer.)

This is false. The correct answer is C. (Select C to read more about the correct answer.)

This is false. The correct answer is C. (Select C to read more about the correct answer.)

This is false. The correct answer is B. (Select B to read more about the correct answer.)

Correct! The answer is B.

When you’re prequalified for a mortgage, it’s a preliminary decision in which a lender simply has given you an estimate of how much you could borrow based on information you provided. When you prequalify, your credit is checked. To get started, you can prequalify for a mortgage online or contact a Mortgage Banker.

Being conditionally approved means the lender has reviewed your credit and verified your income and other assets, such as your bank account and retirement information, to determine how much you can borrow for a loan. It also provides a competitive advantage when making an offer if the seller knows that you’re conditionally approved. Required documents are collected at this time for review. It’s good to start this process if you think you’ll find a home in the next few months. Your conditionally approved amount is usually disclosed in a letter and valid for 90 days.

This is false. The correct answer is B. (Select B to read more about the correct answer.)

This is false. The correct answer is B. (Select B to read more about the correct answer.)

Correct! The answer is B.

This one can be confusing. Your interest rate is the rate you pay your lender to borrow money for your loan. The APR measures the interest rate and certain costs associated with your loan, such as fees and mortgage points—also known as discount points—you may have bought. It’s also expressed as a percentage and is usually higher than the interest rate. APR is the best way to compare loan offers between lenders.

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This is false. The correct answer is C. (Select C to read more about the correct answer.)

This is false. The correct answer is C. (Select C to read more about the correct answer.)

This is false. The correct answer is A. (Select A to read more about the correct answer.)

This is false. The correct answer is A. (Select A to read more about the correct answer.)

This is false. The correct answer is B. (Select B to read more about the correct answer.)

Correct! The answer is B.

PMI stands for private mortgage insurance. It’s often required by your lender and added to your monthly mortgage payment if your down payment is less than 20% of the purchase price or appraised value—determined by an evaluation of the property to see its market value. PMI is insurance for the lender in case you can’t make your loan payments. You typically pay PMI until you build sufficient equity in your home.

This is false. The correct answer is B. (Select B to read more about the correct answer.)