Homebuying
What is a down payment when buying a house?
A down payment is the amount of money you pay upfront toward the purchase price of the home.
What is a certificate of deposit (CD)?
A savings account that offers higher interest rates than regular savings accounts, but requires you to keep your money deposited for a set period of time.
This rule suggests saving at least 20% of your income, divided between short-term and long-term goals.
50/30/20 rule
True or False: Only my monthly credit card payments count toward my Debt to Income Ratio.
False
What are property taxes, and how do they differ from income taxes?
Property taxes are taxes levied on the value of the property by the local government.
Income taxes are based on earnings.
How many months of emergency savings should you have?
3-6 months
What is the pay yourself first method?
A method in which you automatically set aside a portion of your income to savings, investments, or retirement before you do anything else with the rest of your money.
True or False: My DTI ratio is the only factor lenders consider when approving a loan.
False
What is Private Mortgage Insurance (PMI), and when do you need it?
PMI is insurance that protects the lender if the borrower defaults on the loan.
It’s required if your down payment is less than 20% of the home’s purchase price.
What is a for-profit organization? What is an example?
This type of organization is designed to make money for its owners or shareholders, with profits distributed among them.
TD Bank
When creating a homeownership budget, what should be included in your monthly expenses?
Monthly expenses should include the mortgage payment, property taxes, homeowners insurance, utilities, maintenance, and repairs.
What is the purpose of the debt to income ratio?
Debt-to-Income Ratio (DTI) is used by lenders, especially when applying for loans or mortgages, to assess your ability to repay your debts.
How does interest rate affect the total cost of your mortgage over the life of the loan?
A higher interest rate increases the total amount paid over the life of the loan because you’re paying more in interest each month.
What is an online bank?
This is a form of financial institution that provides customers with banking services but does not necessarily have physical branches; many transactions are done online.
This budgeting method involves tracking and limiting spending in categories that are flexible, like dining out or entertainment. Each dollar has a specific purpose.
zero-based budget
If a person has a DTI ratio above 43%, what does this mean?
Lenders may consider the borrower to be a higher risk and might be less likely to approve a mortgage loan.
What is a home inspection, and why is it important?
A home inspection is an examination of a property’s condition, typically conducted by a professional inspector.
It is important because it can uncover hidden issues, such as structural problems or necessary repairs, before you commit to buying.
What is the current mortgage interest rate?
6.19%
True or False: A budget is a one-time plan and doesn’t need to be updated.
False
Sarah earns $4,200 each month. She has the following monthly debt payments: $1,000 for her mortgage, $300 for a car loan, and $150 for a student loan. What is her DTI ratio?
30.95%?
(1,000 + 300 + 150 = 1,450; 1,450 ÷ 4,200 = 0.3095 or 30.95%)