chapter 10 (purchasing and financing a home)

the size of the monthly payment on a mortgage is NOT dependent on the

broker's commission

title search and insurance, appraisal fee, and other costs

closing costs

adjustable- rate mortgages are riskier than fixed-rate mortgages. however, they may be useful when the interest rate is expected to ____ in the future

decrease

the first step in the home-buying process should be to

determine a realistic price range of homes you can afford

for a conventional mortgage you will typically need a ______ of from 10% to 20% of the selling price of the home you are purchasing

down payment

if you obtain an FHA or VA loan you will make additional payments each month to cover your home insurance and property taxes that will be placed in an account called an

escrow account

points paid at closing are for payment of

financing charges or interest

when homeowners expect interest rates will rise, they prefer

fixed rate loans

if you anticipate your income rising slowly but steadily over the years, you may want to consider a

graduated payment mortgage

if a person chooses to purchase a more expensive home

he or she may have to cut expenses in other areas such as entertainment

the type of home which probably would require the lowest maintenance is a

home built by a well-known construction company

homeowner's association monthly dues

include water, sewer, garbage, and maintenance or other amenities such as a pool, clubhouse, and a tennis court

an amortization schedule shows all but the

increase in market value

over the life of a mortgage, the payment to principal _____ and the portion to interest expense _______

increases, decreases

which of the following statements about interest-only mortgages is not true?

interest-only mortgages allow the borrow to pay only interest for the life of the mortgage

if a homebuyer shops around, they can probably avoid

loan origination fee

which of the following is most important when selecting a home?

location

when obtaining a mortgage you should

maintain some funds for liquidity purposes to cover unanticipated bills

what is true about condominiums

maintenance fees of common areas are shared

before you buy a house, you conduct a _________ to determine if the price is comparable to similar houses in the area

market analysis

a good way to estimate the market value of a home

multiply the number of square feet by the average price per square foot of similar homes in the area

in negotiating a price for the purchase of a home, you should do all of the follwing

offer the highest price you can afford first to get it settled quickly

homeowner's association fees are not

optional to homeowners in an area

on a fixed rat mortgage, the monthly

payment remains constant and interest rate stays the same

which of the following reflects the impact of a strong economy on home prices

people spend their money more conservatively

fees charged by a lender as a percentage of the purchase price

points

included in closing costs

points, title charges, recording fees

all the information except __________, can be found on variety of Web sites about mortgages

projected rate increases

a ________ is responsible for determining the value of the home as part of the loan process

real estate appraiser

what fee is not borne by the purchaser

realtor's commission

when selling a home, which of the following costs will you incur

realtor's commission

making extra mortgage payments does which of the following

reduces the length of the loan

owning a home entails all of the following expenses expect

renter's insurance

which of the following costs associated with home ownership is hardest to budget?

repairs

of the following criteria for selecting a home, which would usually diminish the most in importance as the age of the buyers exceed 50?

school system

all of the following illustrate lessons learned regarding the 2008-2009 financial crisis

sellers were able to attract potential buyers by slightly reducing sale prices

in an effort to stimulate the housing market, some financial institutions accepted a ______ arrangement in which the proceeds of the sale of the home were less than the debt owed on the home

short-sale

for a long-term loan, such as 30 years, the amount of principle you pay on your loan during the first few years is quite ____

small

when a mortgage lender provides loans to borrowers without sufficient income or a down payment, the lender is said to provide a ________ mortgage

subprime

which should be considered when selecting a condominium?

taxes, resale value, association dues

which of the following is the primary reason that a mortgage lender may allow a rate modification to an existing mortgage holder with a fixed-rate mortgage?

the borrower may obtain a new mortgage from another lender

an advantage of using online realtor services is that

the commissions and fees are often less than those charged by traditional full-service realtors

buying a home may be the single biggest investment you will ever make so

the decision should be taken very seriously

with government-backed loans

the government insures the loan in the event of default

which of the following is not true concerning adjustable rate mortgages (ARMs)

there is usually not limit on how much rate may increase per year

most home purchases are made initially

with a 10 to 20% down payment and a mortgage

in determining the amount of down payment and monthly mortgage payments you can afford

you should maintain some extra funds for liquidity purposes over unanticipated bills

refinancing a home is usually worthwhile when

you will live in your home long enough to recoup the closing costs

loan application fees range from

$100 to $500

a market analysis is

- an estimate of the price of a home -based on similar homes in the area - determined by multiplying the number of square feet in the home by the average price per square foot of comparable homes

the total cost of owning a home verses renting is calculated by

-adding up the repair and maintenance expenses associated with the home -subtracting the tax savings from the mortgage interest expense and taxes -subtracting the expected value of the equity of the home at the end of the period

your home value is likely to be higher with all of the following

-being close to a school -having a convenient location - being in an area where a large retail business has just moved in

when buying a home, all of the following factors should be considered

-consider a condominium as an alternative to purchasing a house -once you decide how much you can afford, identify a specific home you desire -evaluate the homes for sale in your target area

to determine how much home you can afford to purchase, you should consider

-finding a good internet page that has a mortgage calculator -looking at your budget, balance sheet, and income statement -consulting a loan officer

when purchasing a home, which of the following costs will you incur

-origination fee -application fee -appraisal

which of the following would you actor into a decision to buy or rent a house

-the return you can receive on investing your money -current mortgages rate on 30-year fixed rate mortgages -the value you place on your pride of ownership

on the purchase of a home, one "point" is equal to

1% of the amount being financed

annual property taxes for homes are usually

1% to 2% of the home value

the monthly payment for a 15-year loan would be about _____ times as much as a comparable 30-year loan

1.25

a conventional mortgage requires a

10-20% down payment

during the financial crisis of 2008-2009, approximately _______% of subprime mortgages had late payments of at least 30 days

25

if you wish to keep your monthly payments as low and predictable as you can, you should use a

30-year fixed rate

a 15-year mortgage compared to a 30-year mortgage has all of the following except

a lower appraisal fee

the purchase of a home represents

a potential liability if you need to move quickly and the home does not appreciate rapidly in value

ARM

adjustable-rate mortgage

a mortgage where the interest owned changes in response to movements in a specific determined interest rate

adjustable-rate mortgage

the schedule that discloses the monthly payment that you will make, based on a specific mortgage amount, a fixed interest rate level, and maturity is called an

amortization schedule

false about condominiums

an individual owner may mow the grass or make repairs to common areas when needed

the interest rate on an ARM may be adjusted

any of the above depending on the terms of the loan

the type of mortgage that is usually the shortest term and will require further action at the end of it is a

balloon payment mortgage