FINN 1003 (CHAPTER 7)

10. A duplex is a house with two or more separate dwellings.

FALSE A duplex is a building with two separate homes.

26. At the closing of a home purchase, the buyer conducts a walk-through of the property.

FALSE A walk-through should be completed prior to closing. At closing, documents are signed, last-minute details are settled, and appropriate amounts are paid.

29. About 50 percent of home sales are By Owner.

FALSE About 10 percent are by owner.

31. If your home is assessed for $200,000, the market value of the home should be less than $200,000.

FALSE According to the Personal Finance in Practice, the assessed value is normally lower than the market value.

2. Your decision to rent or to buy your residence should be based solely on lifestyle factors.

FALSE Financial factors should also be considered.

20. Merrill bought a house and applied for a loan through the VA (Veterans Administration). The VA will provide the down payment when he closes on the house.

FALSE Government agencies, such as the VA, do not provide the down payment. Instead, they help home buyers obtain low-interest, low-down-payment loans.

28. Home improvements will definitely increase the selling price.

FALSE Home improvements may or may not increase the selling price.

15. An approved mortgage application usually locks in an interest rate for 60 - 120 days.

FALSE Lock in periods usually range from 30 to 90 days.

14. Private mortgage insurance is usually required if the down payment for a home is less than 30 percent.

FALSE PMI applies if the down payment is less than 20 percent.

7. When Brett's apartment lease ends, he should receive his entire security deposit back even though the carpet has been damaged while he was living there.

FALSE Since a security deposit is held to cover the cost of damages, Brett may receive only a part of it back.

23. An advantage of a second mortgage is that the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.

FALSE The definition is for a buy-down.

11. A condominium is a form of housing in which the units in a building are owned by a nonprofit organization

FALSE The definition is for cooperative housing.

8. Rental insurance isn't very important since the landlord's insurance on the building includes coverage on all tenants' belongings.

FALSE The landlord's insurance is not expected to include the personal belongings of the tenants. It is important to obtain adequate renter's insurance in case of damage.

13. When interest rates are high and the demand for homes is low, prices of homes will likely be at a premium

FALSE The prices will probably be low.

5. A landlord has the right to sublet an apartment.

FALSE The renter may have this right.

25. If you pay an extra $100 per month on your mortgage, your total loan principal will decrease and your total interest will remain the same.

FALSE The total principal will not change; however, the reduction in interest will reduce the loan period by several years. (The text offers an example of paying an extra $25 per month on a $75,000, 20-year 10 percent mortgage. The impact of the extra payments decreases the loan period by more than 5 years.)

16. As interest rates increase, more people have the ability to afford an average-priced home.

FALSE These are inversely related.

9. A disadvantage of home ownership is the deductibility of mortgage interest and real estate tax payments.

FALSE This is a financial benefit.

3. An advantage of renting is pride of ownership.

FALSE This is an advantage of buying.

18. The most common conventional mortgage is the 20 year ARM.

FALSE A conventional mortgage has a fixed rate and fixed payment. An adjustable loan does not fit into this category.

27. The purpose of an escrow account is to pay the points at closing.

FALSE An escrow is money from your monthly payments used for the payment of property taxes and home insurance.

19. Most new mortgages are assumable.

FALSE Due to volatile interest rates, assumable mortgages are seldom offered.

17. Mortgage points are paid at the end of the mortgage.

FALSE Points are prepaid interest and are paid when you buy the house and take out the mortgage.

1. Your lifestyle affects your housing buying decisions.

TRUE

12. A handyman's special is a home that needs work and is priced lower than homes in better condition.

TRUE

22. A balloon mortgage has fixed monthly payments for a period of time. At the end of that time, the entire principal balance must be paid in full.

TRUE

24. An advantage of a buy-down is that the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.

TRUE

30. A real estate agent can provide service to save you time and effort with selling your home.

TRUE

4. Angela wanted to rent an apartment, so her landlord required her to sign a lease. The lease is a legal document that defines the conditions of her rental agreement.

TRUE

6. Lenny the landlord has the right to take legal action against Tina the tenant if she does not pay her rent on a timely basis

TRUE

21. Most low and middle income people will NOT qualify for a VA-guaranteed loan.

TRUE VA loans assist eligible armed services veterans with home purchases. FHA loans are available for many low and middle income people.