Homebuyer Course Flashcards

Questions and Answers

Can we deduct mortgage closing costs?

Only on certain upgrades.

Yes, we can deduct mortgage closing costs. (correct)

Not mentioned.

No, we cannot deduct mortgage closing costs.

What is equity?

Equity is the amount of ownership a homeowner has in their home.

What is defaulting?

Failing to meet financial obligations.

What is a creditor?

A person or company to whom money is owed. Signup and view all the answers

How do credit card accounts help or hurt your credit?

Accounts open for a long time help your credit, while inactive accounts and opening too many accounts can hurt your score. Signup and view all the answers

What score does FICO top out at?

850 Signup and view all the answers

Can you get your credit score and credit report for free?

You can get your credit report for free once a year; the credit score costs a fee. Signup and view all the answers

What is the single best way to improve your credit?

Pay your bills on time. Signup and view all the answers

How long do late payments, judgments, and foreclosures stay on your record?

7 years; bankruptcy stays for 7-10 years. Signup and view all the answers

Will checking your credit report hurt your score?

False Signup and view all the answers

How can you get your credit score?

You can purchase it from one of the credit reporting bureaus. Signup and view all the answers

What's the difference between fixed expenses and flexible expenses?

Fixed expenses are regular and unchanged, while flexible expenses are discretionary. Signup and view all the answers

How do you calculate discretionary income?

Monthly income minus fixed expenses. Signup and view all the answers

What is a Homeownership Advisor?

They provide guidance throughout the home buying process. Signup and view all the answers

What is a Real Estate Attorney?

They review offers and help resolve issues. Signup and view all the answers

What's a good idea in terms of savings from a Homeownership Advisor?

Put X dollars into savings every paycheck. Signup and view all the answers

What is the purpose of an underwriter?

They approve your loan on behalf of the lender. Signup and view all the answers

What is a mortgage broker?

Someone who helps you shop for and compare loans. Signup and view all the answers

What is the purchase agreement?

A written contract specifying the terms of the sold property. Signup and view all the answers

What is a facilitator in real estate?

A real estate agent who helps complete the purchase agreement. Signup and view all the answers

What is the principal?

The amount you borrowed from the lender. Signup and view all the answers

How was underwriting done before, and how is it done today?

Previously by hand; now often by automated systems. Signup and view all the answers

Who is the closing agent?

Sometimes called an escrow officer who facilitates the final transaction. Signup and view all the answers

What is amortization?

Payments spread out over a set period. Signup and view all the answers

What is an escrow account?

A special account for holding payments for taxes and insurance. Signup and view all the answers

What's the difference between prequalification and preapproval?

Prequalification is informal; preapproval is a formal commitment. Signup and view all the answers

Study Notes

Mortgage and Closing Costs

Mortgage closing costs can be deducted and tax credits are available for home upgrades like solar panels.

Equity

Equity represents a homeowner's ownership in their property, calculated by subtracting the mortgage balance from the current market value.

Defaulting

Defaulting occurs when a borrower fails to fulfill their financial obligations.

Creditor

A creditor is any individual or company to whom money is owed.

Credit Card Impact

Long-standing credit card accounts can positively impact credit scores, while inactive accounts may harm scores. Opening multiple accounts in a short period can also negatively affect credit.

FICO Score

The highest possible FICO credit score is 850.

Free Credit Report

Credit reports can be obtained for free annually; credit scores are available for purchase.

Improving Credit

The most effective way to improve credit is by consistently paying bills on time.

Record of Payments

Late payments, judgments, and foreclosures remain on credit records for 7 years; bankruptcies can last 7-10 years.

Checking Credit Report

Checking your credit report does not affect your credit score if done through the authorized website, www.annualcreditreport.com.

Obtaining Credit Score

Credit scores can be purchased from credit reporting bureaus.

Expense Types

Fixed expenses are regular and consistent (e.g., rent), while flexible expenses are discretionary (e.g., dining out). Periodic expenses occur less frequently, like car insurance.

Discretionary Income Calculation

Discretionary income is calculated by subtracting fixed expenses from total monthly income.

Homeownership Advisor

A Homeownership Advisor provides guidance during the home buying process.

Real Estate Attorney

A Real Estate Attorney reviews purchase offers and helps resolve issues like title insurance and compliance with environmental laws.

Savings Tips

Homeownership Advisors recommend setting aside a specific amount from each paycheck into savings and allocating tax refunds or raises to savings.

Role of Underwriter

An underwriter assesses and approves loans on behalf of lenders.

Mortgage Broker

A mortgage broker assists clients in comparing and shopping for different loan options.

Purchase Agreement

A purchase agreement is a contract signed by the buyer and seller detailing the terms and conditions of the sale.

Facilitator

A facilitator is a real estate agent who facilitates the purchase agreement without representing the buyer.

Principal

The principal is the total amount borrowed from a lender.

Underwriting Process

Underwriting has evolved from manual processes taking up to 2 months to automated systems that can make decisions in a few days.

Closing Agent

A closing agent, also known as an "escrow officer," represents the title company and manages the final transaction process.

Amortization

Amortization entails spreading payments across a predetermined period, typically the term of the loan (e.g., 30 years).

Escrow Account

An escrow account collects monthly payments for property taxes and insurance, integrated into the mortgage payment, allowing the lender to cover these expenses on behalf of the borrower.

Prequalification vs. Preapproval

Prequalification offers an informal borrowing estimate based on income and debts, while preapproval is a formal agreement indicating the lender's readiness to finance a specific amount when actively searching for homes.

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Description

Test your knowledge with these flashcards designed for the Framework Homebuyer Course. Each card tackles essential concepts like mortgage deductions, equity, and financial obligations. Great for anyone preparing to navigate the home buying process!