Chapter 9-12
Joe Smith earns $72,000 per year. His bank uses a rule that PITI must be equal to or less than one third of gross monthly income. If his home owner's insurance is $100 per month, roughly how much of a monthly payment can Joe afford including taxes over and above the $100 for insurance?
$1,900
The annual rental payments for an apartment are $16,000 with the renters insurance of $300 and the lost interest on the security deposit of $100. A comparable homework which would cost about $22,000 per year. How much will the rental option cost?
$16,400
Lonette and Al received a statement reporting that they paid $7000 in mortgage interest during the past year. If they are in a 29% tax bracket, this deduction may reduce her taxable income by:
$7000: mortgage interest on an unowned residence is fully tax deductible, thereby reducing the taxable amount by the full mortgage interest
Place the steps of the mortgage process in the sequence in which they occur
1. Complete mortgage application 2. Meet with lender, evidence of job and income 3. Lender gets credit report, confirms financial aspects 4. Mortgage is approved or denied
Order the steps, from first to last, to take before signing a rental lease
1. verify lease facts such a starting date and cost 2. Discuss unclear clauses with the lawyer 3. Note condition of rental unit (in writing)
Which of the following are common terms (years) of home mortgages
10,15,20,30
Interest rates drop, and by refinancing you can save $110 a month. If the closing costs on the new mortgage are $2090, how long will it take you to recover your closing costs?
19 months
Private mortgage insurance is required when the down payment is less than ____%.
20
The homeowner protection act requires that a PMI policy be terminated when the equity reaches ____% of the property value at the time the mortgage was executed.
22
Todd Foley is applying for a $220,000 mortgage. He can get a $1540 monthly payment for principal and interest and no points, or a $1,386 monthly payment with 4 points? How many points will it take Todd to recover the cost of the discount points if he takes a lower monthly payment?
57 months: (0.04 x 220,000)/(1,540-1,386)
The benefits of a conventional 15 year or 30 year home mortgage include:
A quicker payoff of the loan than a 30 year amortization, faster equity buildup than a 30 year mortgage, lower rate than a 30 year mortgage.
Renting is more costly in the short run while _______ a home usually has long-term financial advantages
Buying
An adjustable rate mortgage usually has a rate _____ and a _____ cap.
Cap, payment
Many states require that your security deposit be returned within a _____ time.
Certain
When calculating the number of months to recover your ______ costs on a finance of a mortgage, you divide the closing cost by the monthly savings as a result of the new lower payment
Closing
When selecting an apartment, which of the following aspects of the buildings interior should you consider?
Condition of the elevators, exits and security
Which of the following best defines homeowner insurance?
Coverage of your residence and it's financial risks
Increasing your ____ lowers your premium.
Deductible
The financial aspects to be considered when selecting an apartment to lease include monthly rent, length of lease, security _____ , and the cost of _____.
Deposit, utilities
Factors such as the size and arrangement of rooms, layout of kitchen, and the location of bedrooms, closets, and storage space should be considered when inspecting the interior ____ of a home.
Design
The most common sources for a ______ payment for a home purchase include personal savings, pension plan funds, sale of investments, and assistance from relatives.
Down
Which of the following advantages to renting a house?
Easy to move (mobility), minimal financial commitment
Who is most likely to benefit from a reverse mortgage?
Elderly homeowners who can take the funds in the form of a tax free loan to live on and pay back the loan when the home is sold
Strategies designed to reduce the financial impact of death include _____ planning, ____ insurance, and Social Security survivor benefits.
Estate, life
Factors such as the appearance of the neighborhood, the quality of the landscaping, the condition of the driveway, and the outdoor lighting part of the:
Exterior facilities
True or false: factors that impact the asking price for a home include recent asking price of comparable homes in your area.
False
True or false: home-equity loan interest is only tax-deductible as long is the proceeds are spent on education with the risk being that a default on the equity loan could mean foreclosure
False: Home equity loan interest is deductible regardless of what the loan proceeds are used for
True or false: Home ownership can limit your mobility as it might be difficult to sell your home when interest rates are low and when the economy is doing well
False: it may be difficult to sell a home when interest rates are high and the economy is slow
The three drawbacks of home ownership are:
Financial uncertainty, higher living costs, limited mobility
You should obtain information about _____ available when selling your home to help potential buyers determine whether a deal is possible.
Financing
The main benefit of a conventional 30 year mortgage is:
Fixed payments
Most homeowners policies cover many perils, but not:
Flood
Potential homeowners without children should evaluate school systems of the municipalities where they might live because:
Good schools translate to rising property values
Which of the following our main services offered by a real estate agent?
Helping you negotiate a price for a home, recommending other advisers to help you with the process of buying or selling a home
The one drawback of a conventional 15 year or 20 year mortgage when compared to a 30 year mortgage is:
Higher monthly payments
Generally speaking the _____ the credit score the _____ the mortgage rate.
Higher, lower
Which of the following are covered by homeowners policy?
House, other structures, personal property
Which of the following is NOT one of the benefits of home ownership?
Income tax deductibility of home repairs
Which of the following are advantages of home ownership?
Income tax savings because of property tax Deductibility, the ability to borrow against the equity in the home, income tax savings because of mortgage interest
The interior construction factors to consider when performing a home _____ include the condition of plumbing, heating units, walls, floors, doors, and ceiling.
Inspection
The expenses covered by a condominium monthly fee include:
Insurance for common areas, improvements, maintenance and repairs
How could the tax benefit and risk of a home equity loan best be described?
Interest is tax-deductible, but default could mean foreclosure
The opportunity costs and common trade-offs of a housing decision include which of the following?
Interest lost on money used for the down payment, the loss of tax advantages, cost to commute to work when you live in an area that offers less expensive housing
Which of the following are advantages associated with renting an apartment?
Less maintenance than owning, easy to move (mobility), minimal financial commitment
The benefit of an interest only mortgage is that the monthly payments are _____ than a conventional mortgage and therefore it easier to _____.
Less, pay
Your ______, needs, desires, and attitudes are reflected in your choice of a home.
Lifestyle
An old adage that the three most important factors to consider when buying a home are location, location, and location means that the ______ plays an important part in determining market value.
Location
Hazards increase the likelihood of a ____ through a peril.
Loss
The financial impact of a death includes:
Loss of income, loss of services, final expenses
The benefits of a FHA/ VA fixed rate mortgage include:
Low down payment, fully assumable, no prepayment penalties
What are the disadvantages of owning a condominium?
Monthly fees, uncertain demand affecting property value, less privacy
Tenants are often subjected to restrictions regarding _____, decorating and remodeling.
Pets
The benefits of an ARM mortgage me include the following options:
Possible future payment decreases, possible future rate decreases, lower initial rates than fixed rate loans
Which of the following are advantages to owning your home?
Pride in ownership, tax benefits
The advantages to owning a new home include:
Pride of ownership, tax benefits, no previous owner so you know the history of the home
Automobile insurance covers _____ and personal damage (bodily injury) caused by the policyholders car.
Property
The tenant is protected by rental increase during the lease term unless the lease contains a _____ allowing for increase
Provision
In addition to showing your home marketing it to potential buyers, the real estate agent can screen potential homebuyers to see if they _____ for mortgage financing.
Qualify
The number of factors can impact the amount you spend on your home including current mortgage _____, size of down ______ you can make, your income
Rates, Payment
Your insurance protection for your home should be based on the amount needed to _____ or repair your house and not the amount you originally ____ for the home.
Rebuild, paid
When purchasing a home, the buyer can expect to pay closing costs such as:
Recording fees, appraisal fee, title insurance
Which of the following home improvements are the three most desirable?
Remodeled kitchen, remodeled bathroom, new energy-efficient features
Most mortgage payments are fixed, _____ can be subject increases of her which the tenant has no control
Rent
While most mortgages payments are fixed, ______ can be subject to increase over which the tenant has no control
Rent
Which of the following are the most important three considerations when evaluating a local school system?
School funding, program variety, achievement level of students
The factors to examine when selecting the location of an apartment include:
Schools and shopping, public transportation
A _____ deposit provides the landlord with the funds to cover the cost of any damages done to the rental unit during the lease Period.
Security
Which of the following best captures the steps for a search for rental housing?
Select a neighborhood, determine affordable rental payments, compare cost of comparable units on the market, and talk to current and past residence
The factors that influence the asking price for a home include recent _____ prices of comparable homes in the area, demand for homes in the housing market, and available financing.
Selling
An insurance company is a risk _____ business that agrees to pay for losses that may happen to someone if it insures.
Sharing
The most popular form of housing is:
Single family dwelling
The one drawback of an FHA/VA fixed rate mortgage is:
Slow processing time
Many mortgage companies and banks will prequalify you for a mortgage loan by determining how much you ______ can for a home mortgage payment.
Spend
Your budgeted financial obligations help dictate the appropriate amount to _____ On housing.
Spend
Renters have fewer responsibilities than homeowners because:
Tenants are not responsible for maintenance or repairs
Which of the following are advantages of home ownership?
The ability to borrow against the equity in the home, income tax savings because of mortgage interest, income tax savings because of property tax deductibility
Despite the fact that conventional mortgages offer fixed payment, so I'm borrowers will select an adjustable rate mortgage over a conventional mortgage because:
The adjustable rate mortgage has lower initial payments
Which of the following best describes the rights of residence of cooperative housing?
The right to occupy the unit for as long as stock is owed
Which of the following are reasons why the initial cost of renting are lower in the short run?
There are usually no major repair costs, there is no down payment required (other then a security deposit), there is no closing costs.
Which of the following best describes the role of a home inspector?
To review the interior and exterior construction, facilities, and design of a potential home purchase
Or false: negotiating the purchase price for a home may involve an offer and several counteroffers
True
True or false, the drawback of an ARM mortgage is that monthly payments could rise in the future
True
True or false: Two external (market) factors that affect the price of a home are the current demand for housing and the financing options (ie nterest rates) available.
True
True or false: as a general rule, it may be wise to refinance when the interest rates are at least 1% point below your current mortgage rate.
True
True or false: banks, savings and loans, and mortgage companies are common source of mortgage loans.
True
True or false: even if you do not use a real estate agent to sell your home, you should use an attorney or title company to close the transaction.
True
True or false: life insurance replaces income lost when the policyholder dies
True
True or false: one drawback of an adjustable rate mortgage is that the monthly payment may increase in future years if interest rates increase
True
True or false: the additional cost you incur as a result of home ownership are because of the cost of maintenance, home in provement's, and will state taxes -costs you don't have one renting
True
True or false: the basic risk management plan sets goals to reduce the potential cost of income to premature death, illness, accident, or unemployment.
True
True or false: the coverage of comprehensive form HO - 5 allows for the replacement cost for the contents of your home.
True
True or false: the importance of preparing your home for sale is that it can make for a fast and financially affordable sale.
True
True or false: the monthly payment amount will be higher on a 15 year loan then on the 30 year loan, but the total amount repaid will be less
True
True or false: the services that a real estate agent can provide include suggesting an asking price, making potential buyers and other agents aware of your home, and screening potential buyers to determine whether they will qualify for mortgage.
True
True or false: homeowners insurance covers damages to your home due to many peril such as fire and a windstorm, and it also covers personal injuries received by persons on your property
Trye
What type policy supplements you're basic personal liability coverage and provides protection for injury claims?
Umbrella policy
The main factors that influence premiums for automobile insurance are:
Vehicle type, reading territory, and driver classification
What are some of the living expenses (other than the rent payment) that you will incur if you were to rent a unit?
Water bill, heat, electricity
Tenants form HO-4 covers personal belongings from the perils of which of the following?
Windstorm, smoke, fire, wind
Advantages of owning a manufactured home (mobile home) include which of the following?
flexibility in The selection of features and appliances, less expensive than other options
