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The Mortgage Test

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Let’s Play Twenty [Mortgage] Questions!

>>>I’ll take RESPA for $200, Alex. Oops, wrong game. No one is in Jeopardy here.

We’ve been blogging along for a while. It seems, then, an appropriate time to test your knowledge, see if you’ve been reading, question your commitment to becoming a mortgage expert, or at least make you chuckle some. Here are twenty questions related to all of my previous blogs. As a former teacher, I am appalled that I have not only provided the correct answers, but also attached the link that refers back to the original, applicable blog. This is so much more than an “open book” test. Let’s go…

1. T/F: Joe Schmoe, who works for XYZ Mortgage Company as a Loan Officer, was a used car salesman last week and has no idea what he is trying to sell or why. FALSE If Joe is an NMLS certified and state licensed Loan Officer, he had to complete training, pass tests, and probably go through some sort of rookie or mentor program before he can work with clients. Take a deep breath.

2. To obtain mortgage approval, be prepared to provide the following: a) the purchase contract; b) your Social Security Number and your full address(es) for the past two years; c) your most recent pay stub showing year-to-date earnings; d) W-2’s for the past two years and a recent paystub showing YTD earnings; e) all of that and more. The correct answer is e and focus on that “and more” aspect please.

3. T/F: In terms of the money you will need to obtain a mortgage approval and pay the down payment and closing costs, you can use your personally estimated value of paintings, etchings, wall murals, Cabbage Patch doll collections, etc. FALSE If you need the funds from these for mortgage approval or closing, you will most likely need to prove and document the associated value and be prepared to sell them (and also be able to prove you can do that, with a documented seller.

4. If you purchase a condo, you may have to pay: a) Home Owner’s Association dues; b) taxes; c) utilities; d) an additional bag charge; e) all but d E it is!  Weeee!! (unless you live in an airliner, of course)

5. Fill in the blank: FICO stands for _______________________ The answer is NOT F*^&^%$ International Credit Operatives. It is Fair Isaac Corporation and it yields your credit score.

6. T/F: Deflategate refers to the feelings a borrower gets when being denied for a mortgage. FALSE,  Deflategate is a controversy in the National Football League, stemming from an allegation that the New England Patriots used suspiciously underinflated footballs in an American Football Conference Championship Game against the Indianapolis Colts.

7. Suppose there are ten houses on Elm Street, which is a quarter mile long, and three of the twelve houses are for sale. If one costs $200,000 and the next costs $225,000 and the third costs $1,200,000, which will prove to be the easiest to obtain a home loan to purchase? ANSWER That depends.  If all other nearby houses are in the $200,000 range, then the home selling for $1,200,000 could be considered a ‘white elephant’ and be very difficult to finance. However, if nearby houses recently sold in the $1,200,000 range, then run screaming from the other two for sale unless you are a flip expert or Real Estate Investor or buying one of those two to rehab or tear down. Ask your Realtor about home sales on and near Elm Street. Of course, if you can’t decide between buying a $200,000 or $1,200,000 house, then call me. I have some ocean front land that may interest you.

8. The amount of money you will need to bring to closing always varies and is never told to you in advance. FALSE Ask Joe Schmoe about the Good Faith Estimate and when his company will enact TRID. The government has adopted a policy of “Know Before You Owe” and mortgage lenders are required to abide by this, even though it is not a very appealing rhyme.

9. If you’re buying a home and know you will be moving again in 3 years, it is best to choose a thirty year fixed mortgage with zero points.  Wwwweeeellll, probably not. Unless your goal is to pay lots more money every month than you need to, you may want to discuss a 3/1 or 5/1 loan with Joe Schmoe.

10. T/F: Gaps in employment, the time you spend between jobs and not working, actually assist you in obtaining mortgage approval as they demonstrate excellent life balance. FALSE Mortgage lenders feel there is a direct correlation between consistent employment and paying bills on time. Therefore, gaps in employment will be closely scrutinized.

11. If you are asked to write a ‘Letter of Explanation’ to assist in your mortgage processing, your main focus should be: a) to have it be as grammatically correct as possible; b) to consider it as the Prologue to your Life Story; make it as long as possible; c) to imply it was someone else’s fault and convey anger and aggression towards that person or entity; d) to explain the circumstances honestly and clearly and focus on demonstrating responsibility and commitment to paying off debt. D is the key!

12. T/F: Most Mortgage Loan Officers have bumper stickers that state, “Don’t TRID on Me!” FALSE and Joe Schmoe is offended that some of you hesitated on that one!

13. The cost of a credit report is: a) more money than you’ll ever have; b) free; c) free at first but then $120 a month forever; d) one point of the loan amount. The correct answer is b and don’t let those slick online, TV and radio ads talk you into c!

14. A condop is a type of sweet candy that resembles a cross between a gum drop and Condoleezza Rice. TRUE (just kidding!) It is FALSE. The term condop refers to a mixed-used condominium building where at least one of the units is owned by a cooperative corporation and sub-divided into many "co-op" apartments. The other condo units can typically be retail space, office space or a parking garage.

15. If you purchase a home in a flood zone, which choice can you make from among these in order to get mortgage approval? a) convince the Underwriter that Noah is a close relative and he will save you if a flood occurs; b) buy a huge boat and send a photo of that in with your mortgage application; c) pay for flood insurance; d) buy your spouse and kids stilts to use in case the house gets flooded.  C as in Shining SEA, of course!

16. T/F The “points” you pay to obtain a lower mortgage interest rate will be taxed again by the IRS every April 15. FALSE Good grief, I knew I shouldn’t have made all these answers False; the negative mindset is running rampant! The truth is that points paid on a mortgage are typically a tax deduction.

17. If you win $15,000 in the lottery right after you apply for a mortgage: a) cash it, spend it all with glee and joy on fabulous shoes; b) don’t cash the check for at least three years; c) put the check into your account and save all associated paperwork, while giving your LO Joe Schmoe the good news and a copy of all that paperwork; d) use it all to buy more lottery tickets C, as in your mortgage lender will need to SEE the source of all large deposits and have you explain your good fortune.

18. T/F: To better assist mortgage approval, close all credit card accounts before you apply.  FALSE No, no! Part of your credit score is computed as the ratio between how much you owe versus the total credit available to you. So closing accounts may actually lower your FICO score – not good.

19. T/F: The equation “L[c(1 + c)^n]/[(1 + c)^n - 1] =” denotes: a) the speed of sound; b) rocket rotation in an ejected IED; c) the size of the universe; d) a monthly mortgage payment. Yes, it’s D as it da, da, da, dum where L stands for "loan," c stands for "per payment interest," and n is the "payment number."

20. Do I need an entertainment lawyer and/or agent before Joe Schmoe and I contract for our first season of a new comedy show? Oops, sorry, that one just erroneously slipped in there.

21. (The real #20) T/F If you are a veteran, thank you for your service. But you cannot get approved for a mortgage unless you have at least a 20% down payment.  SO FALSE!!!! You may actually be eligible to make a ZERO down payment!

How did you do? Let’s now end with some school humor.

Why did the teacher have to wear her sun glass all the time? … Her students were very bright … If snakes went to school, what would their favorite subject be? ... Hissss-tory … What classroom table doesn’t have any legs?The multiplication tableWhat do you call a student whose library books are overdue?A book keeper



About Kathleen Heck

Kathleen Heck has worked with hundreds of top sales professionals, authors, corporate executives, educators, and management level professionals. She started her career as a college and high school educator. Later she changed industries and moved to financial services, first as a Mortgage Loan Officer and then rising to lead of team of over 2000 financial professionals. She is the author of "After the Beep" and "Meltdown: I Need a Plan". Currently serving as the President of the Croyance Group, Ms. Heck is a Certified Professional Coach and holds several Masters Degrees and a PhD. See more at Croyancegroup.com

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