Freddie Mac - Credit Smart Exam Questions and Answers Already Passed
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.
Making pre-payments (also called principal-only payments) can help you pay off your loan sooner and
potentially save you thousands of dollars in interest payments. - Answers True
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. - Answers True
Select all that apply. If you can't qualify for a loan on your own, you may have other options, including: -
Answers --Finding a co-signer.
--Getting gift funds from a family member.
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.
Making pre-payments (also called principal-only payments) can help you pay off your loan sooner and
potentially save you thousands of dollars in interest payments. - Answers True
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. - Answers True
Select all that apply. If you can't qualify for a loan on your own, you may have other options, including: -
Answers --Finding a co-signer.
--Getting gift funds from a family member.
