How Well Do You Know The Home Buying Process?

(Sue Doerfler, Arizona Republic) - Buying a house can be confusing, what
with finding the right number of bedrooms and bathrooms, the size yard you want
and interior features that catch your fancy - all in the neighborhood you
desire.

Once you've looked at a dozen or more houses and made your selection, it's time
to collapse in your easy chair and put your feet up on the ottoman, right?
Wrong.

Finding the house is only the beginning of the process. You also have to
negotiate the price if it's a resale house, determine options and lot location
if it's new construction, make a down payment, have a credit check done,
arrange for financing, meet with title company officials, attend the closing,
and take care of myriad other details that come up.

Along the way, you'll encounter the mysterious lingo of home-buying, terms such
as "points" and "lock-in." These words mean one thing in
everyday language, but something totally different in the realm of real estate.

Don't become frustrated. Instead, familiarize yourself with the jargon, before
you buy a house, so you'll feel confident about the process. Don't hesitate to
ask a real-estate agent, lender or other housing professional to explain
exactly what he or she is talking about if you don't understand the terms.

Take the following quiz to determine your home-buying savvy. Give yourself 5
points for each correct answer. Answers and scoring are at the end
of the quiz.

1. POINT:

a. An idea or fact presented by the real-estate agent.

b. A charge that equals 1 percent of the loan amount.

c. A statement of fact in a purchase contract.

d. An addendum to the purchase contract.

2. CLOSING

a. When the buyer decides not to buy a house.

b. When you walk over the threshold of your new house for the first time and
close the front door.

c. The process of paying earnest money and finalizing negotiations.

d. The process of legally transferring a piece of property to the buyer from
the seller.

3. DEED OF TRUST:

a. A legal document needed to purchase a house in Arizona.

b. A note signed by the mortgage company indicating it trusts the borrower will
repay the loan.

c. A note signed by the borrower showing an intent to purchase a house.

d. A deed that lists closing costs.

4. LOCK:

a. The number of days before your purchase offer expires.

b. An electronic security device that can be opened only by real-estate agents.

c. A period of time for which a certain interest rate is good.

d. Securing a certain lot within a subdivision.

5. QUALIFYING:

a. An event held for prospective buyers to see who can buy a house the fastest.

b. The process of determining the sales price of a house given all its standard
and upgraded features.

c. The process of meeting the financial requirements for a home mortgage, in
which a borrower's credit, income and debt, among other items, are reviewed.

d. An event that determines whether a house conforms to building code
requirements.

6. ANNUAL PERCENTAGE
RATE:

a. The effective rate of interest.

b. The percentage of the principal that is paid off yearly.

c. The relationship between the principal to the interest that is paid
annually.

d. The percentage of the borrower's annual income needed for the mortgage
payments.

7. PITI IS AN ACRONYM
FOR:

a. Principal, interest, taxes and insurance.

b. Principal, interest, title and insurance.

c. Property, investment, taxes and insurance.

d. Payments, interest, title and insurance.

8. ANNUAL CAP:

a. The dollar amount that your monthly payment on an adjustable-rate mortgage
(ARM) can be raised or lowered each year.

b. The amount that property taxes can be raised annually.

c. A baseball-style cap, embroidered with the builder's or real-estate firm's
name, that is sent to you annually as a thank-you for buying a house.

d. The amount that an interest rate on an adjustable-rate mortgage (ARM) can be
raised or lowered each year.

9. A DEBT-TO-INCOME
RATIO:

a. The ratio of a borrower's monthly debt compared with monthly net income.
This ratio is used in determining whether the borrower can qualify for the
loan.

b. The ratio of a borrower's monthly debt compared with monthly gross income,
used to figure out whether the buyer can qualify for the loan.

c. The amount of debt in relation to the income a borrower is likely to earn
during his or her life.

d. The increase in debt that a mortgage payment adds in comparison with a
stable monthly income.

10. AMORTIZATION:

a. Prepayment of a loan.

b. A schedule listing how much interest is due on a loan.

c. A mortifying experience during the home-buying process.

d. Repayment of a mortgage through payments made over a set period of time at
regular intervals.

11. SETBACKS:

a. Construction timetables that have fallen behind schedule.

b. The amount of space that separates the front curb from the back fence of a
house, as dictated by city codes.

c. The distance that a house must be from a curb and from the property lines of
neighboring houses or development, according to city codes.

d. Problems encountered when buying a house.

12. ESCROW:

a. Fancy molding used on walls and ceilings. Typically has a scrolled design.

b. An agreement between the buyer and seller.

c. Property, documents and/or money held for safekeeping until specified terms
of a sales contract are completed.

d. Property used as collateral.

13. HAZARD INSURANCE:

a. Insurance required by lenders to protect against loan defaults. Can be
included in the mortgage payment.

b. Insurance covering damage from certain occurrences, such as fire and wind.
Can be included in the mortgage payment.

c. Insurance covering thefts on a building site. An upfront charge to buyers.

d. Insurance against construction problems. An upfront charge to buyers. U

14. CAVEAT EMPTOR:

a. "Let the buyer beware."

b. "Let the seller beware."

c. "There is no place like home."

d. "Let the homeowner eat caviar."

15. LOAN-TO-VALUE
RATIO:

a. A comparison of mortgage interest rates offered by lenders.

b. The mortgage amount compared with the value of other houses in a given
neighborhood.

c. The amount borrowed compared with the appraised value or sales price of a
house.

d. The relationship between the mortgage amount and the amount of appreciation
a house is expected to have.

ANSWERS:

1: POINT: b. A charge that equals 1 percent of the loan amount.

2: CLOSING: d. The process of legally transferring a piece of
property to the buyer from the seller.

3. DEED OF TRUST: a. A legal document needed to purchase a house
in Arizona.

4. LOCK: c. A period of time for which a certain interest rate is
good.

5. QUALIFYING: c. The process of meeting the financial requirements
for a home mortgage, in which a borrower's credit, income and debt, among other
items, are reviewed.

6. ANNUAL PERCENTAGE RATE: a. The effective rate of interest.

7. PITI IS AN ACRONYM FOR: a. Principal, interest, taxes and
insurance.

8. ANNUAL CAP: d. The amount that an interest rate on an
adjustable-rate mortgage (ARM) can be raised or lowered each year.

9. A DEBT-TO-INCOME RATIO: b. The ratio of a borrower's monthly debt
compared with monthly gross income, used to figure out whether the buyer can
qualify for the loan.

10. AMORTIZATION: d. Repayment of a mortgage through payments made
over a set period of time at regular intervals.

11. SETBACKS: c. The distance that a house must be from a curb and
from the property lines of neighboring houses or development, according to city
codes.

12. ESCROW: c. Property, documents and/or money held for safekeeping
until specified terms of a sales contract are completed.

13. HAZARD INSURANCE: b. Insurance covering damage from certain
occurrences, such as fire and wind. Can be included in the mortgage payment.

14. CAVEAT EMPTOR: a. "Let the buyer beware."

15. LOAN-TO-VALUE RATIO: c. The amount borrowed compared with the
appraised value or sales price of a house.

SCORING:

70 to 75: You're a pro at the home-buying game. How many houses have you
purchased? Four? Six? Or are you a real-estate agent?

50 to 65: You've been through this real-estate thing before, at least
once. Still, you'll need to concentrate on your next sale/purchase to make sure
your eyes don't glaze over at some of the jargon.

Below 50: Remedial real-estate help is needed. Retake the quiz. Read the
real-estate columns. And, please, talk to some real-estate and lending
professionals before you buy a house.

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