Do you really understand what it takes to acquire real estate financing, especially when you have a not-so-spectacular credit score? Take the following quiz and see how you rate.
Question One
When it comes to truth-in-lending laws, what are the disclosures a lender must make when processing a mortgage for bad credit loan?
(a) The length of the mortgage
(b) The current market index rate
(c) Your loan-to-debt ratio
(d) All costs of the loan
Answer: (d) All the costs of the loan. When you apply for any of the mortgages for people with bad credit, the lender must disclose all costs associated with the loan. These include the APR or annual percentage rate, any service charges, appraisal fees, survey costs, attorney's fees and costs attributed to title and escrow fees.
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Question Two
Certain ARMs or adjustable rate mortgages offer the flexibility to convert the loan to a fixed-rate type of mortgage on the anniversary date of the origination of the loan. This is offered typically within what amount of time?
(a) One year
(b) Ten years
(c) Six months
(d) Five years
Answer: (d) Five years.
Question Three
Which of the following situations is the best type of condition for securing mortgage loans for bad credit?
(a) When you can pay for the loan with a down payment
(b) When your credit card payments are below their limits
(c) In a "seller's market"
(d) In a "buyer's market"
Answer: (d) In a "buyer's market." In this type of market, you have the opportunity of usually buying a house at around 20% below its normal asking price. Therefore, you have a lot of room to negotiate as well as easily procure the services of any of the mortgage lenders for bad credit who secure mortgage loans for people with bad credit.
Question Four
What is the major advantage of obtaining a 15-year adjustable rate mortgage (ARM) over the same type of mortgage for bad credit loan for 30 years?
(a) The term for repayment can be extended
(b) It has a 2% annual cap
(c) More of the principal is paid each month reducing the interest costs over the loan's life
(d) More of the interest is paid each month to pay off the loan
Answer: (c) With a 15-year mortgage, your monthly payment is more because you're paying a greater amount of the principal. Therefore, your interest costs are reduced.
Question Five
Generally, how long does it take for most mortgages for bad credit to close?
(a) One month
(b) Five days
(c) One week
(d) Two weeks
Answer: (d) Two weeks. Generally, these types of loans can take, on average, a couple weeks to close.
Question Six
What is another name for mortgage lenders for bad credit?
(a) Traditional lenders
(b) Secured loan lenders
(c) Sub-prime lenders
(d) Bankers
Answer: (c) Bad credit lenders are also referred to as sub-prime lenders. If you obtain a loan from this type of lender, you are known as a sub-prime borrower.
How did you do? The more information you have, the more prepared you will be when shopping for a bad credit loan. The Internet can give your further information and resources if you're looking for mortgages for bad credt.
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