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Now, on to this week’s test.

Are you financially fit?

In 3 minutes you’ll know if you have some financial workouts to do.

Take the 3-question home buying quiz to see if you’re prepared to wade into the housing market.

Which of the following is not considered a government backed loan?

Answer: C

“Conventional Loan”

Conventional loans are not issued by the government and do not enjoy the same benefits of government-backed loans. Government backed loans are not necessarily better than conventional loans. Instead, the best applicable loan is determined by your eligibility and financial situation.

Here is some more info on specific government backed loans:

1. FHA loans - loans backed by the Federal Housing Administration, which means the lender has greater confidence their loans will be paid back when insured by the federal government. Often FHA loans are appealing to first-time home buyers because the loans can be given to those with poor credit, low down payment, and sometimes even having filed a bankruptcy.

2. USDA loans - loans backed by the United State Department of Agriculture for low-income individuals in select rural areas.

3. VA loans - available to members of the military forces and backed by the Department of Veterans Affairs.

What is the benefit of pre-paying in your mortgage?

Answer: C

“You pay less in interest over the life of the loan”

Mortgage interest is a big deal, especially in a time of elevated mortgage rates. If you buy a $400,000 house with a 10% downpayment ($40,000), average property taxes of $270 a month, homeowners insurance of $233 a month, and Private Mortgage Insurance of $150 a month, you are looking at a total cost of $940,140 paid over the life of the loan—around $580,000 in interest alone. Prepayments, which is making more payments or contributing more money than required, can seriously reduce the interest you pay over the duration of your mortgage. On that same mortgage, one extra monthly payment a year can reduce the interest paid by roughly $180,000. $100 a month can reduce the interest by around $90,000.

What financial benchmark has the greatest impact on mortgage rates?

Answer: E

“All of the above have an affect”

This is a tricky question. Financial markets are complicated, and mortgage rates are no different. Any one of these factors can have the largest impact on mortgage rates depending on monetary policy, fiscal policy, and economic conditions. In fact, there are even more factors impacting mortgage rates including housing market conditions and the actual market for existing mortgage backed securities. At present, higher than average inflation, a tight housing market, elevated interest rates, and solid economic growth means mortgage rates remain high.

Looking for more info on housing?

If you’re looking for a primer on housing, check out our Knowledge Base Article on Everything you should know before buying your first house.